Data & Research April 18, 2012

Confidence in Retirement Savings Drops Slightly

Confidence in retirement savings and overall financial security both dropped one point, to 57% and 41%, respectively, according to Country Financial’s Security Index.   
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The bimonthly survey showed a slight uptick, to 66.2 points, in financial security sentiments—the fourth consecutive increase in financial security sentiments, the longest in the five years Country Financial has been producing the report.

Improvements in savings and optimism about college funding helped to drive the overall increase. Of survey respondents, 53% were able to set aside money for savings, a three-point increase from February, the largest number able to save since October 2008.

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The number of people who expressed confidence in their ability to send their children to college jumped five points, to 61%.

Despite these gains, Americans seem undecided about the future of their financial security.

Americans who said their overall level of financial security was getting worse inched up two points, to 39%.

 

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"With both gains and declines, the data seems to show cautious optimism. Americans might be unsure what shape economic recovery will take, which could be fueling their desire to save," said Keith Brannan, vice president of financial security planning at Country Financial.

More than any other age group, 40- to 49-year-olds exhibited strong optimism in both their short- and long-term money matters. Confidence in retirement and those who rate their overall financial security for 40- to 49-year-olds were both up six points, to 57% and 41%, respectively.

Eighty-one percent were confident in their ability to pay debts, up nine points. There was also a 13-point jump, to 58%, in those able to set aside money for savings.

Sixty-four percent were confident in their ability to send their children to college, a 12-point increase from February.

The index is an aggregate of various factors comprising financial security including savings and investments, financial planning, retirement, education and asset protection. It is compiled by the independent research firm Rasmussen Reports LLC, based on a national telephone and online survey of at least 3,000 Americans.

For more information on the Index, visit www.countryfinancialsecurityindex.com. 

 

Data & Research April 18, 2012

Half of Plan Sponsors Offer Auto Enrollment

 Plan automation solutions play a key role in the plan design process, a survey found.  
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The second annual Retirement Plan Survey by Mesirow Financial Retirement Plan Advisory found that 50% of plan sponsors surveyed offer automatic enrollment features, and one-third include a step-by-step deferral rate option.

Implementing fee disclosure is at the forefront for 2012. Mesirow’s research suggests that plan sponsors allocate sufficient time and resources to ensure regulations are addressed to the satisfaction of the Department of Labor (DOL), and that employee communications are effective. Plan sponsors, along with their providers, should maintain a careful watch as fee disclosure rolls out in 2012. Respondents were asked, “Is your outsourcing provider communicating all fee disclosure regulations to your satisfaction [e.g., 408(b)(2), 404(a)(5)]? The majority (90.5%) said yes, while 9.5% stated no.

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A surprising find is that 34.4% of plan sponsors said they do not know if their adviser or consultant is acting as an investment co-fiduciary. Only 36.1% said yes, as a 3(21) fiduciary; 1.6% said yes, as a 3(38) fiduciary; and 27.9% said no.

Nonqualified Plans 

When asked if highly compensated employees (HCEs) limited their voluntary contributions to the retirement plan because of nondiscrimination testing results, 13.1% said yes, all HCEs are limited to a set percentage contribution limit each year, which is less than the maximum percentage allowed under the plan; 29.8% stated yes, some HCEs receive a portion of their deferrals back to them taxably after testing results are known; and 57.1% said no, all employees, whether highly compensated or not, are eligible to contribute to the retirement plan up to the maximum allowed by the IRS.

For nonqualified plans offered, 25% offer voluntary employee deferral plans; 17.9% offer employer matching/profit sharing plans; 7.1% offer employer-provided defined benefit (DB) plans, commonly referred to as an SERP (Supplemental Executive Retirement Plan), and 67.9% do not offer nonqualified plans.

 

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Plan sponsors are hopeful that there is progress in educating participants about the merits of taking part in their retirement plans, the survey found. One major concern is the lack of participant understanding and appreciation of the retirement plan benefit, yet satisfaction levels seem positive. The provider community offers multiple options in trying to meet the educational requirements and needs of both plan sponsor and of participants.

When asked to rate participant satisfaction with planning tools, participant website materials and meetings to help reach saving goals, 14.4% of respondents said they were very satisfied; 75.6% were satisfied; 5.6% were not satisfied; and 4.4% do not use these options.

Since the finalization of the Pension Protection Act, target-date funds (TDFs) have grown exponentially in usage and assets. The trend continues in Mesirow’s latest findings as plan sponsors use TDFs for double duty as a plan’s QDIA and also as a managed account strategy. The majority of respondents (72.4%) offer TDFs, while 27.6% do not. 

 

 

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