Sponsors Aware of Responsibility to Workers

According to the study report, 62% of plan sponsors surveyed this year feel that their responsibility includes taking an interest whether employees are tracking towards a comfortable retirement. This year, Deloitte asked respondents to rank the importance of “participant retirement readiness,” and it moved right to the top as the most important improvement plan.

Meanwhile, according to the Deloitte report, 15% of plan sponsors surveyed believe most employees will be prepared for retirement. However, sponsors appear unsure about which tools and offerings are most effective at helping participants manage this.

A mere 25% of plan sponsors surveyed offer managed accounts. However, more than half (51%) make individual financial counseling/investment advice available to all participants, the study found. An additional 16% are considering adding this feature in the next two years. For those that do not offer this service, potential fiduciary responsibility continues to be listed as the top reason for not offering it (60%), Deloitte said.

Further, according to the study, fewer than 5% of plans currently offer retirement income products. Only 12% of plan sponsors surveyed indicate they are considering adding in-plan or at-retirement income options.

“Our workforce is maturing and changing and our 401(k) plans are struggling to keep pace,” Deloitte said in the report. “The Baby Boomers have begun their transition into retirement and the debate regarding the success of 401(k) plans in the U.S. is a hot one. Participant readiness is in the spotlight in the media, on Capitol Hill, and in our homes. In Deloitte’s opinion, retirement readiness will continue to be in the spotlight for years to come.”

Common 2010 Participant Activity

In other results, sponsors reported the most common actions taken by participants over the past 12 months were:

• Increased loan activity (49%)
• Decreased deferral rates (41%)
• Increased withdrawals – hardship, in-service (40%)
• No changes (23%)
• Rebalancing portfolios to be less aggressive (21%)

In 2010, Deloitte said there was an increase in plan sponsors offering employer matching contributions (66%) from 2009 (59%). Among those that previously suspended matching contributions, 55% reported that they plan to reinstate matching contributions within the next 24 months.

From a plan design perspective, the average number of investment options available to participants has risen from less than 10 in 2000 to more than 20 in 2010. Eligibility restrictions have also been dramatically altered as 86% of respondents now allow participant eligibility in the first three months. Similarly, vesting schedules have been reduced; in 2000, 42% offered a four- to six-year graded schedule, and in 2010, 42% now offer immediate vesting of employer contributions.

The Deloitte study report is available here.