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Plan sponsors are concerned about advising participants on savings contribution rates
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Employees overwhelmingly favor their employers playing a larger role in helping them save for retirement, but plan sponsors voice reluctance to do so, a new study from financial services firm Northern Trust shows.
The survey of more than 1,000 participants in workplace 401(k) or other defined contribution (DC) retirement plans found that:
In addition, more than 4 in 5 employees surveyed said they would consider taking their employer’s advice when determining their contribution to a 401(k) plan.
For their part, plan sponsors interviewed for the study had reservations about taking a more active role in encouraging specific levels of saving and providing projections of retirement savings or income for participants.
“Plan sponsors generally agree it’s important to encourage saving for retirement,” Jim Danaher, managing director of Defined Contribution Solutions at Northern Trust, said in a news release. “They have real concerns, however, about providing participants with targeted recommendations—by salary level or age—about how much they should be saving.”
The differing survey responses suggest employer behavior needs to change as employees look for plan sponsors to take a more active role in their retirement plans. At the same time, the study shows that policy issues, such as management’s role as a fiduciary, must be clarified before senior leaders will be comfortable providing the level of guidance sought by plan participants.
“Clearly most American workers must save more to have a financially secure retirement,” said Mathew Greenwald, president of research firm Greenwald & Associates, which conducted the survey and interviews. “This survey found that most who participate in a retirement plan believe they are able to save far more for retirement than they are now. Indeed, two in three plan participants say they can save at least 10 percent of their salary. A key issue is how to help workers set aside the amount of money they know they should, and these workers believe their employers can provide crucial assistance.”
Improving DC Plans
Based on the employee survey results, Northern Trust advised these actions to help employees achieve financial security in retirement:
‘Financial Wellness’ Scores Improve with Auto 401(k)s
During 2014, 64 percent of 401(k) plans combined auto enrollment and auto increase features, representing a 25 percent increase compared to one year earlier,
according to the latest Bank of America Merrill Lynchaccording to the latest Bank of America Merrill Lynch
401(k) Wellness Scorecard.
As a result of these automatic features, this past year saw 32 percent higher participation rates for plans offering auto enrollment and 46 percent more employees scheduling automatic increases.
The semiannual scorecard report
reveals trends in the behaviors of 2.5 million employees at companies with financial benefit plans serviced by Bank of America Merrill Lynch.
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter
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