Plan Sponsors Know What to Do, But…

Over the past two years, defined contribution (DC) plan sponsors have taken small but significant steps to help participants improve their retirement readiness.

However, according to the Defined Contribution Institutional Investment Association’s (DCIIA’s) 2012 Plan Sponsor Survey, plan sponsors know what they need to do but are hesitant to do it. When asked about their top objectives, nearly half of plan sponsors chose “increasing participants’ savings rates” first or second on their priority list.  

Plan sponsors’ other major goals included:  

  • improving communication and education efforts;
  • improving investment outcomes;
  • facilitating optimal retirement income replacement; and  
  • increasing participation rates. 

Increasingly, plan sponsors are implementing automatic enrollment to achieve these goals; 56% of plan sponsors surveyed use this feature, up from 44% in 2010. One third of plan sponsors that do not currently use auto-enrollment say they expect to within the next 12 months. Yet, many plan sponsors continue to steer clear of auto-enrollment; 44% of plan sponsors that do not currently use the feature say they are unlikely to add it in the next 12 months.


Among the most common reasons for not adding auto-enrollment: the sense that participation rates are already high enough (27%) and the belief that automatic enrollment is too paternalistic (19%).  

In addition, plan sponsors’ implementation of auto-enrollment may undermine their number one goal of increasing savings rates. While plan sponsors say participants should set aside at least 10% of their income for retirement, more than half (54%) report default contribution rates of 3% or less. Only 19% of plan sponsors offer automatic deferral escalation in conjunction with automatic enrollment. Those that do say they see it as a way to prevent inertia from derailing participants from achieving their retirement savings goals.  

According to the survey results, only 14% of plans currently offer in-plan retirement income solutions; however, 40% say they expect to introduce a retirement income solution within the next five years. Plan sponsors indicate they have not offered them to participants yet because solutions continue to evolve and due to concerns about portability and regulatory uncertainty.  

A total of 118 plan sponsors completed the survey between March 1 and April 6. A report of the findings is at under “Publications.”