Many employers are not confident that employees are financially prepared for retirement, according to a recent Aon Hewitt survey. As a result, some organizations are adding features and making plan design changes to boost savings rates and promote responsible investing for 2011.
The survey found that only 30 percent of companies are confident employees are sufficiently prepared for retirement, showing no improvement from 2010.
Employers are taking a number of approaches to increase participation in savings plans, including offering automatic enrollment, automatic contribution escalation, and automatic rebalancing. According to the Aon Hewitt survey:
- 57 percent of plans offered automatic enrollment last year
- 36 percent of the plans that do not currently have this feature are likely to add it in 2011
- 47 percent of plans offered automatic contribution escalation last year
- 27 percent of plans offered automatic rebalancing last year
The survey also found that companies are also increasingly focusing on services and products to help employees manage their finances throughout retirement.
- 61 percent provide online modeling tools to help employees determine how much they can spend each year of retirement based on their current savings levels.
- 27 percent already provide some form of retirement income solution.
- 19 percent facilitate annuities either outside, or within a plan.
- 13 percent plan to add one of these in-plan solutions this year, including managed payout funds, managed accounts with drawdown feature and annuities.
Other key findings of the survey include:
- 85 percent of companies plan to review their defined contribution fund operations in 2011, including fund expenses and revenue sharing. Additionally, 69 percent of companies indicate they will increase the amount of employee communication surrounding investments and plan fees.
- 34 percent offer Roth 401(k), up from 29 percent in 2010. Of those not currently offering this option, 38 percent indicate they will add the capability in 2011.
- 23 percent of employers suspended or reduced company matching contributions in the past two years. Of those, 55 percent have already reinstated it in some form and 18 percent plan to reinstate or increase it in 2011.
The findings are similar to a recent ING survey, which found that only 53 percent of Americans are currently saving for retirement, despite the fact that most (97 %) fully understand that the earlier they start saving for retirement, the better off they will be.