How can financial advisors specializing in employee benefits distinguish themselves from a crowded field of competitors who also focused on the worksite market? One possible strategy is to urge prospective employer-clients to adopt 5 recommendations highlighted in a new report from the Transamerica Center for Retirement Studies.
The TCRS survey, “The Retirement Readiness Challenge: Five Ways Employers Can Improve Their 401(k)s,” is the latest in a series of reports that Transamerica has conducted of business employers and workers regarding their attitudes toward retirement.
Among the report’s recommendations for employers:
1. Adopt automatic plan features to increase savings rates
The report shows that the percentage of plan sponsors offering automatic enrollment increased to 29 percent in 2014 from 23 percent in 2007. Plan sponsors’ adoption of automatic enrollment is most prevalent in large companies. Fifty-five percent of large companies offer automatic enrollment. This compares to just 27 percent of small non-micro companies and 21 percent of micro companies.
Among plan sponsors with automatic enrollment, 34 percent automatically increase participants’ contributions annually with no action required by participants.
2. Consider professionally managed services and asset allocation suites
The report shows that 84 percent of plan sponsors now offer managed account service and/or asset allocation suite, including:
- 56 percent offer target date funds that change allocation percentages for participants as they approach their target retirement year;
- 54 percent offer target risk funds that address participants’ risk tolerance profiles; and
- 64 percent offer an account (or service) that is managed by a professional investment advisor who makes investment or allocation decisions on their behalf.
3. Add the Roth 401(k) option to facilitate after-tax contributions