A Diversified Investment Advisors news release about its Report on Retirement Plans – 2006 said more than a third (36%) of large corporate employers now offer a 401(a) plan – up markedly from the 12% who did so two years ago.
“In most cases, these companies are offering a 401(a) defined contribution plan such as a money purchase plan funded with matching contributions to a 401(k) plan not only to help contain the risk inherent in defined benefit plans, but because they remain committed to help fund their employees’ retirement benefits,” said Patrick Kendall, vice president and national practice leader of defined benefit and 401(k) markets at Diversified, in the news release.
The study also found that even before passage of the Pension Protection Act, 44% of large companies had implemented auto enrollment. Another 11% of respondents said they implemented the feature at the time the survey was completed.
In addition, corporate sponsors said they have already installed or are currently implementing automated features such as deferral increases (15%), rebalancing (24%), and managed account options (32%).
In defined contribution plans in the coming year, besides adding investment options (46%) and enhancing participant education (45%), offering investment advice (31%) was a priority. Nineteen percent of defined contribution plan sponsors indicated they plan to change providers in the upcoming year.
Also, even though 401(k) plans have been in existence for over 20 years, employee participation in them continues to increase, with 57% of 401(k) plan sponsors reporting participation rates of at least 70%, according to the announcement. This is up from 53% a year ago.
Meanwhile, on the defined benefit side, 23% of plan sponsors surveyed said they intend to terminate their DB plan; 28% intend to freeze their plan and another 26% reported they plan to reduce DB plan benefits over the course of the next year, the press release said.
In a related area, while 36% of respondents said they have never considered total retirement outsourcing (TRO), 34% said they are either currently considering it, already using it, or are in the process of implementing it. Slightly more (39%) said they are considering or have implemented total benefits outsourcing (TBO), citing the lower cost of administration as the single greatest advantage. This represents a 6% increase over last year’s TBO findings.
The survey was conducted by Diversified Investment Advisors, Inc. and administered by LIMRA International and FGI Research, Inc. among US companies with at least 1,000 employees. The survey featured responses from 233 individuals responsible for the administration of benefits at their firm. Of those companies surveyed, all offer a defined contribution plan and 156 offered a defined benefit plan. The survey contains data based on the 2005 plan year.
More information about diversified is at http://www.divinvest.com.