Do employers finally get it, or is it a defensive move to prevent top talent from leaving? Who cares …a new survey from Aon Hewitt shows more employers are making changes to their 401(k) plans to boost participation and encourage savings.
With only one-in-five workers on track to retire at age 65, Aon finds U.S. employers are taking steps to help workers save more and improve their long-term financial outlook. The comprehensive survey (it involved more than 360 employers and 10 million employees) shows 401(k) plans are shifting in three key areas:
- Company Match: To encourage workers to save more, employers are putting more “skin in the game.” This means 42 percent of companies match dollar-for-dollar, up from 31 percent in 2013. Before 2013, $0.50 per $1.00 was the most common formula.
- Automatic Enrollment: Employers are defaulting employee contributions at a higher rate. Of the employers that automatically enroll their workers, 52 percent automatically enroll workers at a savings rate of 4 percent or more, up from 39 percent of employers in 2013. Additionally, 51 percent default workers at or above the company match threshold, nearly 10 percentage points higher than in 2013.
- Back-sweeping: Most employers only automatically enroll new hires, but many are taking action to ensure more workers participate in the plan. Currently, 16 percent of employers automatically enroll all eligible employees (also called “back-sweeping”) on an ongoing, annual or one-time basis—double the percentage that did so in 2013.
“With more workers falling short of their retirement savings needs, employers are being more aggressive about making plan design changes that will help workers close the savings gap,” Rob Austin, director of Retirement Research at Aon Hewitt, said in a statement. “While these tweaks to the plan may seem small, they can have a profound impact on workers’ ultimate retirement wealth.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
