The study found 94% of plan sponsors recognize the success of automatic features, including automatic enrollment, automatic escalation and qualified default investment alternatives (QDIAs), in helping them address their plan-related goals and say these features drive higher participation and deferral rates along with better investment performance.
Eighty-five percent of plan sponsors reported that automatic features are especially effective in helping participants who consider themselves less educated on retirement matters. Ninety-seven percent of plan sponsors who have adopted the bundle of automatic enrollment, automatic escalation and QDIA say the advantages outweigh any perceived disadvantages.
Plans with automatic escalation experienced deferral rates of 8% or higher compared to the average deferral rates of 4% or less reported by the Plan Sponsor Council of America (PSCA) for the majority of plans.
However, the Lincoln Retirement Power study found that while new communication channels have emerged since the advent of auto features, they have not kept pace with cultural and generational shifts or the evolution of plan design. Only 51% of sponsors say they offer customized communication and only half (50%) have revamped communication materials since the introduction of auto features.
Plan sponsors agree that employee communication must shift significantly when automatic features are adopted. That means moving away from education that is technical in nature - such as how to enroll or the investments offered - to engaging participants in a more meaningful discussion about their individual savings behaviors and strategies such as their future monthly retirement income, spending power and projected retirement lifestyle.
“The strong combination of auto solutions plus outcomes-focused communication has the power to motivate people, in a positive way, to take an active role in their retirement readiness,” said Chuck Cornelio, president, Retirement Plan Services, Lincoln Financial Group.
More information on the Retirement Power study is here.