Retirement Providers Will Increase Auto Enroll, Default Contribution Rates

A growing number of retirement plan sponsors will automatically enroll participants at higher default contribution rates in the next four years, Transamerica Retirement Solutions reported Monday.

Ninety-five percent of experts Transamerica surveyed said 55% of plan sponsors would use automatic enrollment by 2019.

Three-quarters said that 45% of plan sponsors would default participants into their plan at a 6% or higher contribution rate.

This rate compares with many plans’ 2% to 4% default rate, which the study said was insufficient to support a successful retirement.

Transamerica noted in a statement that assets invested in retirement plans could grow to $35 trillion in the next few years, owing in part to anticipated system and product improvements, as well as to increased participation.

For instance, some 75% of small private employers (50 to 100 employees) will have defined contribution coverage, up 12% from current levels, according to the survey.

The report said plan sponsors increasingly rely on mobile applications to communicate with participants for notifications, transaction verification and trigger events, such as unusual account activity, that require immediate one-click action.

Seventy-nine percent of experts in the survey said nearly all retirement plan providers in the near future would send participants alerts about their state of retirement readiness.

And 92% expected most retirement plan providers to offer a service showing whether participants are on course to reach a funded retirement.

“While plan sponsors are still focused on increasing participation in retirement plans by their employees, they are also looking for ways to increase contribution rates participants need to achieve a successful retirement,” Transamerica senior vice president of retirement marketing Wendy Daniels said in a statement.