Sponsors Cautious about Enhancing Retirement Benefits

The vast majority of companies surveyed (82%) reported they now offer a 401(k) or similar employee funded plan, up from 78% the previous year. Of those companies, those that reported offering a matching contribution fell to 69% from 76% the year prior, according to a press release.   

For companies that don’t currently offer a plan to employees, 87% indicate they are unlikely to in the near future, with 74% “not at all likely.” This is a sharp increase from the prior year’s survey in which only 59% indicated they weren’t likely, and only 43% “not at all likely.” This shift was much more prominent among small businesses. Cost-related concerns continue to be a recurring theme for not offering a plan.   

The survey found that adoption rates of some key plan features have stalled:  

• Auto-enrollment and escalation: Twenty-seven percent of employers automatically enroll employees into their company sponsored retirement plan, up slightly from 24% the previous year. Large companies (43%) remain much more likely than small companies (25%) to automatically enroll employees. Of employers that do not automatically enroll their employees, most (84%) do not plan to in the future. 
• Advice and Guidance: Nearly all employers (93%) believe they give employees the right information to make decisions about their retirement plan; however, there was no change in the percentage of employers offering investment advice/guidance (58%). Among those not offering advice, 88% do not plan to in the near future. Of note, significantly more employers are citing potential liability as a reason for not offering advice than the year prior (48% vs. 35% previously).  
• Roth 401(k): Nearly one-quarter of employers offer a Roth 401(k) or similar option, consistent with the previous year. Roth adoption also remains relatively equal among small and large employers. Almost eight in 10 employers that don’t currently offer a Roth option don’t plan to in the near future, with more than one-third of those citing lack of employee interest.  
• An Annuity as a Distribution Option: Just over one-quarter (26%) of employers offer an income annuity as a distribution option for retiring employees in their plan, up slightly from 24% the prior year. 

The press release said during the past year, 27% of employers who offer a 401(k) or similar plan made changes to their company plan, up slightly from last year. Of those that made changes to their plan, a change in investment selections was the most common, and saw the most significant increase from the year prior (48% vs. 38% previously). 

Participant Satisfaction and Engagement  

The 11^th Annual Transamerica Retirement Survey found that of those employers who sponsor a 401(k) or similar plan, satisfaction with retirement plans and providers remains high, with 95% reporting satisfaction with their provider and 97% reporting that employees are satisfied with the company’s plan. The majority of employers (81%) are not concerned with the financial stability of their plan provider.   

Employers are also reporting high levels of satisfaction with the elements of their plans. Ninety-five percent of employers say their employees are satisfied with the quality of investments within the company’s plan, while more than two-thirds report their employees are content with the number of investment options available to them.   

However, employers still lack confidence in their employees’ involvement with the plan. Nearly four in five employers agree that the employees at their company do not know as much as they should about retirement investing, while fewer than half agree that their employees are very involved in monitoring and managing their retirement savings. Additionally, three-quarters of employers believe their employees could work until age 65 and still not have enough saved to meet their needs in retirement, while only 53% are confident in their employees’ ability to achieve a comfortable lifestyle in retirement.  

The full survey results are at http://www.transamericacenter.org.