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Retirement Planning > Saving for Retirement

5 best practices for boosting DC plan participation

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Numerous studies bemoan the low contribution levels to employer-sponsored retirement savings accounts. Now comes a report claiming that the implementation of certain plan design changes can boost employees’ retirement savings rates by up to 74 percent.

The source of this assertion, a Fidelity Investments benchmarking report on best practices in retirement plan design, rests its conclusions on an analysis of Fidelity’s proprietary business data of more than two million employees and 600 not-for-profit health care retirement plans. The benchmarking report’s five best practices for improving retirement readiness include:


Actions to Take


Increase plan participation rate.

Implement automatic enrollment (AE)

Implement employer-matching contributions.

Plans with automatic enrollment have a 57 percent higher participation rate than plans without AE.

Plans with an employer match have a 53 percent higher participation rate.

Increase employee savings rate.

Implement an Annual Increase Program (AIP).

Employees in plans with an Annual Increase Program save at a 74 percent higher rate.

Strengthen employee asset allocation.

Use a target date fund as the default investment option.

The number of employees with an age-based asset allocation increases by 73 percent.

Increase employee engagement in retirement planning.

Make education and guidance resources available to employees.

Thirty-eight percent of employees who received guidance from Fidelity took action.

Measure retirement readiness.

Determine metric to measure readiness and communication to employees.

Fifty-three percent of not-for-profit sponsors have established a retirement readiness metric. 

Fidelity’s report shows that plans with auto enrollment enjoy an average participation rate of 80 percent of benefits-eligible workers. This compares with an average of just 51 percent of plans that don’t offer auto enrollment.

“Despite the power of AE, only 24 percent of not-for-profit health care plans use it, compared to 42 percent in the corporate sector,” the report states. “Employer match is also a strong lever to increase participation rates — plans with an employer match have on average a 53 percent higher participation rate than those that do not.”


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