Data & Research September 8, 2011

Employers Adopting Features to Help Employees Save

An analysis from Charles Schwab shows a growing number of employers are providing their employees with value-added 401(k) plan features that help drive positive plan participation and savings behaviors. 
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Eighty-one percent of employers now make 401(k) advice available to plan participants, compared to just 42% in 2005. Seventy percent of employers currently include target-date funds in their fund line-ups, compared to 57% in 2005.

In addition, the Schwab data show 41% of employers automatically enroll participants, up dramatically from just 5% in 2005. These figures are even greater among larger companies. At companies with more than 2,500 participants, 57% use automatic enrollment.

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Thirty-six percent of employers using automatic enrollment are also using automatic savings increases, up from 14% in 2006, when Schwab’s plan clients first began implementing automatic savings increases. More than two-thirds (68%) of employers provide a 401(k) matching contribution, down from a peak of 76% in 2006.

“The 401(k) plan is now the primary source of retirement savings for an overwhelming majority of Americans,” said Catherine Golladay, vice president of 401(k) participant services at Charles Schwab. “We see more and more employers taking this responsibility seriously and looking for ways to provide additional support for 401(k) participants.”

 

In Practice September 7, 2011

Understanding Provider Structure Leads to More Satisfied Sponsors

Small-market 401(k) plan sponsors who have a clear understanding of the roles of their provider team members are more likely to be satisfied with their providers than those who do not understand the distinct responsibilities of each team member.
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The survey by Anova Consulting Group consisted of more than 2,000 small market plan sponsors; those with less than $10 million in plan assets. Thirty-four percent said that they did not clearly understand the roles of their service team members. Those who said they fully understand service team members’ roles and responsibilities reported an 83% overall level of satisfaction, compared with 63% overall satisfaction level reported by sponsors who were confused by service team roles.  

Having well-defined roles and responsibilities also helps sponsor satisfaction levels by setting clear expectations. The two areas in the survey in which satisfaction ratings suffer most when sponsors don’t understand service team roles are “treats me as an important client” and “employee education materials and meetings.” Sponsors who clearly understand service team roles are 57% more likely to feel like they are treated as an important client and 55% more likely to be satisfied with their provider’s employee education offering.   

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An additional challenge in the small market is the prevalence of unbundled plans, in which the presence of TPAs can further complicate the service picture.  

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