Large sponsors of retirement plans in the U.S. think employees should be required to participate in defined-contribution plans, according to a study by Northern Trust Corp.
Plan sponsors also endorsed the idea of automatic increases in contributions each year until workers were setting aside more than 10% percent of their salaries toward requirement, according to the study by Northern Trust, Chicago.
The study polled 50 large U.S. defined contribution (DC) plan sponsors and five top investment consultants about what they thought would improve savings in DC plans by U.S. workers. Participants included leaders of DC plans for multinational corporations in the retail, energy, manufacturing and technology sectors, representing more than 970,000 participants and over $100 billion in plan assets.
Specific findings included these:
–63% of plan sponsors and four of five consultants think participation in DC plans should not be optional for employees.
–49 of the 50 plan sponsors and all of the investment consultants in the study believed automatic enrollment would be a key feature of the ideal DC plan.
–Three-quarters of plan sponsors and all consultants supported automatic escalation to build on the default level for employee salary contributions, which most respondents set at between 3% and 7% of salary for auto-enrollment plans.
Virtually all plan sponsors and consultants agreed that the ideal DC plan structure would include significant contributions from employers, and 60% percent of plan sponsors believe employer contributions should vest immediately, the study found.