An increasing number of defined contribution plans of large employers have been adding auto-enrollment, auto-escalation of contributions and Roth options as enhancements to their plans, according to Alight Solutions’ 2017 Trends and Experience benchmarking report on DC plans.
(Related: GAO: Overhaul Entire US Retirement System)
Sixty-six percent of employers have instituted auto-enrollment, up 58% from 2015, and three-quarters of those employers also offer automatic escalation of employee contributions. In most cases, however the auto-enrollment is available only for new employees, not existing ones who don’t participate in their DC plan, according to the report from the benefits outsourcing company that was spun off from Aon earlier this year in a sale to Blackstone Group.
The report is based on a survey of 333 employers offering 401(k), profit sharing, 403(b), 401(a) and 457(b) plans covering nearly 10 million employees and $775 billion in assets. The median plan size was $1.4 billion covering a median 11,000 employees.
The most popular automatic contribution rate was 3%, accounting for 37% of employers surveyed, followed by 6%, which 30% of employers used.
Almost three-quarters of plans also include a Roth option, up from 58% in 2015 and 11% a decade ago, and 43% of plans offer in-plan Roth conversions, allowing employees to convert tax-deferred contributions in a 401(k) plan, for example, to a Roth, whose contributions are after-tax. Ninety-six percent of plans offer a match for contributions to Roth and pretax investments, up slightly from 93% in 2015. The most common match is dollar-for-dollar of employee contributions, up to 6%.
“Companies are being more innovative,” says Rob Austin, Alight’s director of research for health and wealth solutions. “They’re taking the data and insights we’ve seen and using them to enhance their plans even more.”