Survey Finds Gaps in Plan Sponsor Goals, Roles

A new survey reveals a potential disconnect between plan sponsors and plan participants.

Employers still view retirement plans mainly as a benefit rather than as the primary means for their employees to support themselves after retirement, according to a new survey by Wells Fargo Institutional Retirement and Trust.  Fewer than half (45%) say the “primary” goal of offering a retirement plan to their employees is to “provide employees with the means to achieve a financially sound retirement,” according to the report, while slightly more (51%) say the primary reason they offer a retirement plan is to “provide competitive benefits to attract and retain employees.”

Disconnect “Ed”

Asked why they think employees participate in a company-sponsored 401(k) plan, only about a third (30%) of employers say it is because they think participants want to save enough to retire comfortably.  The most common response, cited by 42% of employers surveyed, was that employees participate in order to take advantage of the company’s 401(k) match.

However, when Wells Fargo asked that question of employees in 2008, those responses were reversed; Just over a third (35%) of employees said they were participating so that they could save enough to retire comfortably, while only 33% cited the company match as their incentive.

“We have a real crisis of retirement savings and believe companies can play a crucial role in addressing this by educating and motivating their employees to prepare for a solid and sustainable retirement,” said Laurie Nordquist, director of Wells Fargo Institutional Retirement and Trust. “The fact that fewer than a third of plan sponsors think employees participate in 401(k) plans because they want to retire comfortably suggests there is room for improvement in educational efforts to make sure employees understand the need for income that will see them through retirement. That should be what motivates employees to participate in the plan, above all else.”


Goals Oriented

When companies were asked the question “What is your primary goal for your participants in 2010,” the responses varied, with about a third (35%) saying it was to “educate participants on retirement needs and how much to save.” 

Roughly one-in-five (22%) said the primary plan goal is to “increase participation,” and another 22% were focused on increasing the amount participants save.”  Other objectives cited were:

  • 9% - improve investment diversification
  • 4% - reduce loans/in-service withdrawals taken
  • 2% - facilitate distribution planning (to make savings last through retirement)
  • 5% - do not know

As for the changes they planned to make to their plan within the next 18 months:

  • 14% - increase the number of investment funds
  • 12% - increase matching or other employer contributions
  • 12% - add a Roth deferral feature
  • 10% - add automatic enrolment

On the other hand, nearly one-in-four (39%) said they did not anticipate making any changes during that period. 

Asked to identify “the greatest challenge and concern about your company retirement plan,” about a quarter (26%) cited the “impact of market volatility on account balances,” and a nearly identical 25% said “participant use of the plan.”  One-in-five (19%) said “providing employees with the financial ability to retire.”

When plan sponsors in the survey were asked whether they measure if their employees are financially prepared for retirement, about half (49%) said “they do not measure” results.  A mere one-in-ten indicated they project each employee’s retirement income and compare it to expected needs.

Education Stations

Asked to identify their methods of educating/communicating with participants, the most commonly cited (95%) was distributing the summary plan descriptions (SPD), summary of material modifications, and other mandatory notices.  Ninety percent noted the overview of plan features/benefits during orientation.  Also noted were:

  • 67% - employee meetings
  • 65% - retirement planning worksheets and online calculators
  • 57% - access to a financial adviser
  • 55% - providing frequent (at least quarterly) information on plan features and advantages
  • 44% - materials targeted to selected groups based on participation, diversification, etc.
  • 40% - personalized materials
  • 36% - savings and investment workshops

Asked how they measure the effectiveness of their retirement education programs, most (61%) said they gathered feedback “informally.” A third of that number (22%) said they measure data “before and after” a communication event to see what worked.

“Corporate America measures business performance every day,” said Joe Ready, director of Wells Fargo Institutional Retirement and Trust. “We need to take that mindset and help companies apply it to managing the success of their employees in retirement preparation. Companies play a critical role, and we want them to embrace this position.”

The 2009 Challenges and Goals for Retirement Plans survey and its resulting analyses are developed and sponsored by Wells Fargo & Company’s benefits consulting division, BPS&M. This is the 14th employee benefits survey conducted by BPS&M.    

The survey analysis includes information on defined contribution and defined benefit plans. Boston Research Group conducted the survey entirely online during the fall of 2009. Data were collected from 357 employers from organizations of all types and sizes and from all regions of the U.S. Survey results can be obtained by contacting BPS&M at 615-665-1640 or