Workers Value Key Features of DC Plans

A new study by LIMRA shows most workers understand the need to save for retirement and they prefer to do it through their employers with help from their companies.

More than 50 million American workers have no access to an employer-sponsored retirement plan, according to the Bureau of Labor Statistics, but a survey by the LIMRA Secure Retirement Institute found 61% of these employees are more likely to save for retirement if they had access to one.

Most workers (75%) prefer to save through their employers. And while workers understand the individual need to save for retirement, 53% said they believe employers should be required to offer retirement plans, and 60% believe employers should contribute to their employees’ retirement plans. The same percentage believes the government should require employers to offer retirement savings plans. However, workers expressed the least confidence in the federal government to administer these plans, with only 11% saying they were “very confident” in letting Washington run their retirement savings. The federal government’s myRA program has only gathered about 20,000 participants thus far.

And in the midst of federal and regulatory battle over implementation of the fiduciary rule, 71% of workers agreed it was either very important or somewhat important “knowing that the plan’s investments have been made with my best interests in mind.”

Respondents also said it’s “very important” or “somewhat important” to have a variety of investment options (89%), the ability to take out a loan in case of emergency (77%), the option to invest more than $5,000 per year (84%), the ability of the employer to contribute to their employees’ accounts (89%), and access to educational meetings and materials about the plans (84%).

These are key features of defined contribution (DC) plans. However, only 46% of employers offer these types of plans, according to the Bureau of Labor Statistics. The department’s data also shows that only 58% of civilian workers and 62% of private-sector workers have the opportunity to save for retirement via a DC plan.

“Improving access to worksite retirement savings plans is a critical step in improving retirement security and opportunities for workers,” says Deb Dupont, associate managing director for LIMRA Secure Retirement Institute. “Workers who have the convenience of being able to save for retirement from a payroll deduction are more likely to save than those who don’t. Previous research showed that among those with access, 83% are regularly saving for retirement, while among those without access, only 21% are regularly saving for retirement.

“While simple payroll deduction programs to an individual retirement account (IRA) are a start, as we’ve heard from surveyed workers, it may not be enough. Eighty-six percent of workers want to have the ability to contribute more than $5,000 a year towards their retirement, and IRAs cap contributions at $5,500, only slightly more than the figure we named. In 2016, the maximum contribution limit for IRAs and Roth IRAs was less than a third of the DC plan contribution limit. DC plans have the structure to meet the needs and desires of the modern-day worker.”

The latest results are based on an online survey of 2,498 full- and part-time workers conducted in June 2016. Instructions on accessing the full study “Workers and Retirement Programs: What Are They Thinking?” can be found at