Sponsors Fail to Measure Retirement Readiness Success

There is a disconnect between what retirement plan sponsors believe their plans should be delivering to participants and their willingness to measure retirement readiness, according to a new report from American Century, “Understanding Plan Sponsors’ Perceptions Around Plans, Participants and Partners.”

There is also a disconnect between what sponsors think participants want from them and how much more proactive participants would like their employers to be.

Ninety-one percent of sponsors say it is very or extremely important to help employees have a secure retirement, and 67% say that when measuring the success of their retirement plan, it is very or extremely important that participants are retirement ready. However, just more than one-third, 36%, of sponsors measure how ready their employees are for retirement.

Furthermore, while sponsors believe they are doing a good job of helping their participants manage their retirement plan, participants would like them to do more. Eighty-nine percent of sponsors are confident that they are doing a reasonable job of executing their defined contribution (DC) plan, but 58% think they should have done more to encourage workers to start saving sooner.

When it comes to encouraging employees to save for retirement, only 5% of sponsors think employees would prefer “a kick in the pants,” yet 13% of participants would appreciate this. And while only 15% of sponsors think their participants would welcome “a strong nudge,” in fact, 27% of participants between the ages of 55 and 65 would welcome this, and 28% of those between the ages of 25 and 54 would do so as well.

A full three-quarters, 75%, of sponsors think that participant education is important, yet only 46% think the education they offer is either very or extremely effective.

While nearly 70% of participants would like their employer to automatically enroll them in the plan at a 6% deferral rate, only 48% of sponsors have automatic enrollment in place. Seventy percent of participants say they are fairly interested in their employer boosting their contributions by 1% a year, yet the same amount, 70%, of employers do not have automatic increases. As to why, 46% of sponsors say they just have not considered it yet, and 33% fear employee backlash.

The report also found that 79% of sponsors work with an adviser, and 63% of them are very satisfied with their adviser. Sixty-six percent of advisers say their advisers’ integrity, and 65% say their expertise are important qualities.

American Century’s report is based on a survey of 2,031 participants and 498 sponsors.