Sponsors and Employees Diverge on Post-Retirement Roles

BlackRock’s third annual defined contribution (DC) survey took a two-pronged approach to its research this year, surveying both plan sponsors and participants. One purpose of the survey was to analyze where sponsors and participants feel the bulk of the responsibility lies for the participant to have a secure retirement. The results show that both parties feel the bulk of the responsibility lies with the participant.

When sponsors were asked, “How responsible should each of the following parties be for helping your employees prepare financially for retirement?” 116 out of 119 (97.5%) said the employee is “very responsible.” When participants were asked the same question, 923 out of 1000 respondents (92.3%) said they personally felt “very responsible.”

Likewise, the party with the next-level of responsibility is the employer. Twenty-five percent of plan sponsors said they are “very responsible” for their employees’ retirement security, and 62% said they are “somewhat responsible,” totaling 87% feeling some level of responsibility. Eighteen percent of participants said their employer is “very responsible,” and 53.3% said the employer is “somewhat responsible,” totaling 71% of participants feel their employer has some level of responsibility for their retirement preparedness.

The fork in the road 

BlackRock’s survey data found that employers and employees are mostly on the same page during the accumulation phase; the employer offers support and guidance, which the employee appreciates, and they agree that it’s up to the employee to build a secure retirement.  It’s at the point of retirement and beyond where the expectations diverge.

Forty percent of employees want “a great deal more” information on how to generate a secure income in retirement; 36% want a great deal more information on how to make sure their money lasts through retirement; and 36% also want more information on how to invest their money safely in retirement.

However, only 25% of employers want to deliver “a great deal more” information on how to generate secure income, 22% want to provide more information on how to make sure money lasts through retirement, and 21% want to educate on how to invest wisely in retirement.

BlackRock says this divergence is of critical importance as 35 million Baby Boomers are nearing retirement. A vast majority of employee respondents – 93.6% – favor having an income solution in their DC plan; only 6.4% would be satisfied with just having a lump sum option.  

Perhaps the clearest numerical sign of a “responsibility gap” is that 94% of employers feel that helping employees prepare for retirement is an important goal. Yet only 13% feel helping employees secure an income stream in retirement is equally important.

Partnering with The Boston Research Group, 1,000 participants in a variety of DC plans, including 401(k), 403(b), profit sharing, and stock purchase plans, were surveyed. Separately, 119 plan sponsors were surveyed as well; they included decision-making executives, 60% of which have more than $1 billion in participant assets. Combined, the plan sponsors represent $525 billion in plan assets and 4.1 million participants.