Retirement plan participation and deferral rates both rose again, according to the 2016 PLANSPONSOR Defined Contribution (DC) Survey, as did the percentage of plans with immediate eligibility and immediate vesting. Some could argue that such changes are within the survey’s margin of error, but the five-year trend for these values shows a growth rate that is unquestionably positive
For plan sponsors, benchmarking plans is more relevant than ever, considering avoiding lawsuits, attaining and retaining employees and contending with budgetary and investment pressures.
Comparing plans, or benchmarking, usually falls into one of three categories: 1.) Fee benchmarking, 2.) Hunting for best practices, and 3.) Competitive/peer benchmarking.
When benchmarking fees, sponsors look to ensure that the fees they are paying into their plan are reasonable. Best practices typically focus on improving participation and deferral rates, in order to drive better outcomes. And looking at what competitors are doing vis-à-vis their plan is typically with an eye to retaining and attracting key talent.
This year’s survey found that plans have a median participation rate of 86%, with participants saving a median of 6.5%. Seventy-nine percent of plans permit their participants to take out loans, and 37% allow their participants to begin participating in their plan immediately upon hire. Forty-two percent of plans automatically enroll their employees into the plan, and when they do, 66% use atarget-date fund (TDF) as the default investment.
A full three-quarters, 75%, of plans offer a company match, and slightly more, 76%, offer some form of investment advice. Fifty-eight percent of sponsors have figured out what provider fees have been in the past 12 months, and 68% use a financial consultant or adviser. Only 31% are confident that their employees will reach their retirement goals by age 65.