“Vast Majority” of Employers Doubt Employees Ready for Retirement, Towers Watson Survey Shows
The survey results show significant employer concern that their DC plans are both underutilized and misunderstood by their employees, Towers Watson says. Only one in five respondents (22 percent) believe employees generally make informed decisions about their retirement savings, and only 26 percent believe their employees have realistic expectations about what DC plans can provide. Nearly one-half of respondents (48 percent) expect a greater number of older workers will ultimately delay retirement.
The Towers Watson survey of 371 U.S. employers that offer a 401(k) plan as their primary DC retirement plan finds that more than half of respondents (56 percent) reported employee participation levels at or above 80 percent this year, compared to 50 percent two years ago. The higher participation rates are primarily the result of employers using automatic enrollment, with nearly two in three respondents (65 percent) now using this feature, compared to 51 percent in 2009. To encourage adequate participant savings rates, 71 percent of those that use auto-enrollment also use automatic contribution escalation, which allows a gradual increase in contribution levels over a certain period of time. Employers are also becoming more transparent about fees, with more companies now charging participants direct, equal-dollar recordkeeping fees. One-third of respondents now pay recordkeeping fees through revenue sharing, which represents a decline from 42 percent in 2009.
While nearly three-fourths of respondents (74 percent) say the most prevalent reason for offering a DC plan is to provide their employees with an adequate retirement at a reasonable age, more than half of the respondents cite benefit competitiveness, benefit plan cost, and attraction and retention as the top three issues driving plan design, Towers Watson reports.