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Research

Tips to Improve Retirement Readiness

Retirement plans that instituted retirement readiness best practices into their design saw employee retirement savings rates increase up to 74% following such changes.

A new report from Fidelity Investment, “Defining Excellence: Plan Design and Retirement Readiness in the Not-for-Profit Healthcare Industry,” examined best practices in retirement plan design that can help improve overall retirement readiness of nonprofit health care employees.

“We are continuously leveraging Fidelity’s proprietary plan and participant data to identify trends and develop best practices in retirement plan design,” said John Ragnoni, executive vice president, Tax-Exempt Retirement Services, Fidelity Investments. “Through this analysis, we have enhanced our industry-leading benchmarking capabilities to educate nonprofit health care institutions on plan design changes that can improve employee participation and encourage positive retirement savings outcomes.”

The best practices covered in the report include:

  • Increasing plan participation rates by implementing automatic enrollment and employer matching contributions;
  • Increasing the employee savings rate by implementing an annual increase program;
  • Strengthening employee asset allocation by using a target-date fund as the default investment option;
  • Increasing employee engagement in retirement planning by making education and guidance resources available to employees; and
  • Determine a metric to measure readiness and communicate this information to employees.

“Using these insights, our benefits team is partnering with Fidelity to review plan design and employee engagement strategies that will improve the competitiveness of our plan and help our employees be better prepared for retirement,” said Patricia O’Neil, vice president and treasurer at Rush University Medical Center in Chicago.

With plan participation rates, the report found that employers can help overcome employee inertia by using plan features such as automatic enrollment and employer matches. Plans with automatic enrollment showed an average participation rate of 80% versus 51% for plans not utilizing this feature. Only 24% of nonprofit health care plans were found to use it, compared with 42% in the corporate sector. Plans with an employer match were found to have an average a 53% higher participation rate than those not offering it.

Kevin McGuinness editors@plansponsor.com