401(k) Plan Improvements Aiding Retirement Security, Survey Says
Employees are contributing more as are employers, according to the latest survey from the PSCA.
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Financial advisors working with sponsors of defined contribution plans may want to check out the findings of the 61st Annual Survey of Profit Sharing and 401(k) Plans from the Plan Sponsor Council of America to learn how the plans they work with stack up against the 600-odd plans participating in the survey.
According to the survey, based on 2017 data, nearly three-quarters of plans retain an independent investment advisor to assist with fiduciary responsibilities, up from almost 70% in 2016.
Both employers and employees have increased contributions and more employers have added new features to increase participation and savings rates such as automatic enrollment and contribution escalation.
“Design enhancements that leverage behavioral finance insights such as automatic enrollment, coupled with generous employer matching contributions, are helping build a more financially secure retirement for America’s workers,” said Hattie Greenan, PSCA’s Director of Research and Communications in a statement.
Indeed, employees contributed an average 7.1% to their defined contribution plans in 2017 while employers contributed a record high 5.1% of pay on average last year, bringing total savings for the average employee to more than 12% annually.
In addition, more employers (35%) have shifted their matching contribution formula to a dollar-per-dollar match above the 3% of employee pay, up from 24.1% previously.
Sixty-one percent of plans use automatic enrollment and 60% of those plans use a deferral rate above 3%. Almost 30% of plans that offer auto enrollment also include automatic escalation of contributions for all participants, but only 18% of all funds surveyed provide auto escalation of contributions.
About 70% of plans offer a Roth option, allowing employees to save after-tax funds and 65% of companies offer HSAs.
Just 25% offer wellness plans beyond the standard 401(k) education tool and about 44% use mobile technology to provide plan services to participants.
The plans surveyed were split roughly 60/40 between 401(k) plans and plans that combine 401(k)s with profit-sharing plans. The PSCA is part of the American Retirement Association (ARA), which is a collaborative community of employee benefit plan sponsors,.
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