One possible strategy financial advisors specializing in
employee benefits distinguish themselves from a crowded field of competitors 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
All of the Principal Financial 10 best companies offer and
fund 401(k) or 403(b) plans as well as profit-sharing programs. 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.
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
The report reveals that plan sponsors’ offering the Roth
feature has increased to 52 percent in 2014 from 19 percent in
2007. Very small (50 percent) and large (49 percent) companies are
similarly likely to offer this feature. This compares to 63 percent of
small non-micro companies, which are somewhat more likely to do so.
4. Extend eligibility
to part-time workers to help expand retirement plan coverages
Nearly 8 in 10 employers (79 percent) offer a 401(k) or
similar plan to their employees, including: 98 percent of large employers, 95
percent of small non-micro employers, and 73 percent of micro employers.
- Only 49 percent of 401(k) or similar plan
sponsors say they extend eligibility to part-time workers to save in their
plan.
- Large employers (80 percent) are more likely to
extend eligibility to part-time workers.
- This compares to compares to a bare majority of
small non-micro companies (52 percent) and micro companies (39 percent).
Among plan sponsors not extending eligibility to part-time
employees, 90 percent do not plan to do so in the future and their most
frequently cited reasons include: generally impractical, concerns about
cost, and employees not interested in.
5. Address communication
gaps between employers and workers
The survey findings reveal “major disconnects” between
employers and workers which, if addressed, could help employers maximize
the value of their benefits offering while also helping their employees achieve
retirement readiness.
Nearly all of employers that offer a 401(k) or similar plan
agree that their employees are satisfied with the plan, including 63 percent
that “strongly agree” and 32 percent that “somewhat agree.” In contrast,
only 80 percent of workers who are offered such a plan agree that they are
satisfied with their employers’ plans, including 27 percent who “strongly
agree” and 53 percent who “somewhat agree.”
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