Lincolnshire, Ill. — Oct. 30
The continued shift from defined benefit, or DB, plans to defined contribution, or DC, plans has placed a greater emphasis on employees to take responsibility for their own retirement readiness.
A new survey by Aon Hewitt, the global talent, retirement and health services business of Aon plc, found that employers are increasingly taking bolder actions to help ensure participants achieve greater financial security. Recognizing the vast majority of employees are not prepared to maximize their 401(k) savings potential, employers are making significant changes in plan structure and investments while also increasing the amount of guidance provided to participants.
Aon Hewitt surveyed more than 400 plan sponsors, representing more than 10 million employees, in plans that total $500 billion in retirement assets, to determine their retirement benefits strategies, plan design and administrative practices.
For 77 percent of employers surveyed, DC programs such as 401(k) plans are the primary source of retirement income for their employees. When asked how they measure the success of their DC plans, employers’ top responses were “facilitates adequate retirement income” (18 percent) and “high participation rate” (17 percent).
Aon Hewitt’s survey also shows employers are taking a multi-faceted approach to strengthening their programs and promoting more retirement savings among individuals.
To help contribute to employees’ retirement security, a growing number of employers have increased their company match to the 401(k) plan. Aon Hewitt’s research shows the most common match is now $1.00 per $1.00 on the first 6 percent of employee deferrals, with 19 percent of employers reporting this formula, up from 10 percent in 2011.
Previously, a match of $0.50 per $1.00 on the first 6 percent was the most popular. Overall, nearly all employers (98 percent) provide some sort of employer contribution to the plan.
Rather than making employees wait to enter the plan, employers have drastically relaxed their eligibility requirements over the past decade. Seventy-six percent of plans now allow workers to begin making pre-tax contributions immediately upon hire, up from 71 percent in 2011. Just 45 percent of employers allowed for day-one contributions in 2001. In addition, 53 percent of plans have corresponding immediate eligibility for employer-matching contributions, while 50 percent of plans that offer a non-matching employer contribution allow immediate eligibility.