According to the survey, the adoption of automatic enrollment is most prevalent in larger companies with 10,000 employees or more (57% compared to 48% overall).

Sponsors look to other automatic features to varying degrees to help employees achieve a funded retirement. For example, while less common than auto enrollment, automatic deferral escalation is in place among one-third of plan sponsors, with another third currently considering such a feature. Automatic account rebalancing is expected to grow at nearly the same rate as automatic escalation (36%).

To further enhance participation rates, a growing percentage (58%) of plan sponsors periodically re-enroll employees who originally opted out. “This approach ensures that all employees will be systemically offered an automatic enrollment opportunity,” Diversified Vice President Laura White explained in a press release. “That strategy can be helpful to the 37% of plan sponsors who state that their primary goal in offering a defined contribution is to help employees accumulate income for retirement.”

Another 41% maintain their plans to retain employees—but only 14% use their plan primarily as a tool to recruit employees.

When designing retirement plans, sponsors should bear in mind the primary goal they have established for their plan, Diversified said. For example, while plan sponsors state that it is important for employees to achieve a fully funded retirement, more than one-half (51%) of plan sponsors surveyed acknowledge that their default deferral rate is not sufficient for participants to achieve a funded retirement, and this is consistent across companies of all sizes. According to the study, employees are typically automatically enrolled at a 3% deferral rate or less (33% at 3% and 20% at less than 3%).

The study found the prevalence of defined benefit plans continues to decline. Sixty-seven percent of plan sponsors offer an active traditional defined benefit plan, compared to 72% two years ago, and 36% offer a cash balance plan today, compared to 43% in 2009. Further, sponsors of defined benefit plans are less likely to state the primary goal of the plan is helping employees accumulate income for retirement as compared to plan sponsors overall. Rather, they state the primary plan goal is employee recruitment.

While 43% of defined benefit plan sponsors expect to offer the plan for the next five years, 35% state they will no longer offer the plan to new employees, and another 22% expect to freeze or terminate the plan. Just 34% of smaller companies with 1,000 to 2,499 employees expect to continue to offer defined benefit plans, while 49% of companies with 10,000 or more employees are likely to continue to offer these plans in the next five years.

Other key findings from Diversified's report include: 

• Keeping up with government regulations is a key challenge for large plan sponsors. Thirty-three percent of the largest corporations surveyed find it extremely challenging as compared with 27% overall. Smaller companies—with 1,000 to 2,499 employees—find participant-focused areas more challenging, specifically addressing the topics of investment strategy (20% compared to 16% overall) and managing participants’ questions about fees (19% versus 13% among organizations overall).
• Sponsors and participants are likely to turn to their plan provider for participant investment advice, with companies with 1,000 to 2,499 employees most likely to do so (73% versus 67% overall).
• Plan sponsors indicate that offering advice has led to increased savings rates (55%), more investment reallocations (41%), and increased plan participation rates (26%).
• Smaller companies are more likely to offer 15 or more investment options (34% compared to 29% percent overall).
• Large corporate sponsors state that 67% of their employees participate in their 401(k) plan. One-quarter of these state that 90% or more of their employees contribute. Still, four-in-10 state that 30% of their employees make no contribution at all.
• Nearly all corporate sponsors surveyed (97%) contribute to their 401(k) plans, with 85% offering a matching contribution, the most common type of employer contribution.
• Plans with employer matching contributions have higher deferral rates than plans with fixed employer contributions. Immediate vesting dramatically impacts participation versus cliff vesting, with 73% of employees participating versus 64%, respectively.
• Only 12% of sponsors pay 401(k) plan expenses from an expense budget account. Administrative expenses are most likely paid through asset-based fees (37%) or by direct payments by the plan sponsor (23%).
• As Baby Boomers approach retirement age, plan sponsors are shifting the focus of participant education from accumulation and investment to distribution and retirement income. Nearly 70% send print materials to this group, while half hold seminars.
• One in five plan sponsors are highly interested in retirement income solutions, and another 54% are somewhat interested.
• On average, the rate of return on larger corporate defined benefit plan investments is 14.6%. Larger plan sponsors are split on whether to employ a “de-risking” strategy to minimize volatility with respect to funded percentage: 45% are taking this approach while 41% are still using a “maximizing returns” strategy.

"Report on Retirement Plans - 2011," conducted by Diversified, included responses from 272 individuals responsible for the administration of retirement benefits in their companies.

For a copy of the report, emailRetirementResearchCouncil@divinvest.com.