This is concerning. Only 17 percent of employers are very confident that their employees will be able to achieve a financially secure retirement, according to Transamerica Center for Retirement Studies (TCRS).
It’s new survey, Employers: The Retirement Security Challenge, finds that employers are aware of the need among employees to work beyond traditional retirement age, but few have updated their business practices to support them.
The survey also looks at current retirement benefit offerings and identifies opportunities for expanding coverage and enhancing plan features.
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“Employer-sponsored retirement plans, including 401(k) and similar employee-funded plans, are essential for employers to attract and retain talent,” Catherine Collinson, CEO and president of Transamerica Institute and TCRS, said in a statement. “They have also proven to be one of the most effective ways to facilitate long-term savings among workers. Unfortunately, not all workers have access to these benefits.”
Key findings include:
1) Retirement plan sponsorship rates are lower among small companies
Sixty-five percent of employers provide a 401(k) or similar plan to their employees. These employee-funded plans are more commonly offered by large companies with 500 or more employees (88 percent) and medium companies with 100 to 499 employees (85 percent), compared with small companies with fewer than 100 employees (60 percent) where the opportunity for expanding retirement plan coverage among workers is most significant.
2) Multiple employer plans show promise for expanding coverage
Among employers that do not offer a 401(k) or similar plan, only 31 percent say they are likely to begin sponsoring a plan in the next two years. There may be cause for optimism, however, as 23 percent of those not likely to offer a plan say they would consider joining a multiple employer plan (MEP) offered by a reputable vendor that handles many of the fiduciary and administrative duties at a reasonable cost.
3) Extending eligibility to part-time employees is key to expanding coverage
Among employers that offer a 401(k) or similar plan to their employees, only 46 percent extend eligibility to part-time workers.
4) Automatic enrollment is an underutilized feature that can make it more convenient to save
Automatic enrollment is a plan feature that eliminates the decision-making and action steps usually necessary for employees to enroll in and start contributing to the plan.
Instead, it automatically enrolls employees into their plan with the ability for them to opt-out and stop contributing. Twenty-one percent of plan sponsors have adopted automatic enrollment.
5) Plan sponsors should do more to assist with retirement transition
Workers nearing retirement face a myriad of complex decisions, and plan sponsors have a significant opportunity to work with their retirement plan providers to assist them.
However, few plan sponsors provide things such as educational resources (30 percent), information about distribution options (28 percent), and retirement planning materials (25 percent). Only 17 percent offer an income annuity as a payout option in their retirement plan.
6) Other employee benefits can help improve financial security
In addition to retirement benefits, health and welfare benefits such as health insurance, life insurance, disability insurance, employee assistance programs, workplace wellness programs, and other types of insurance can enhance workers’ financial situation.
These benefits may mitigate out-of-pocket expenses and provide additional resources to help address financial shocks. Relatively few employers provide this full range of benefits, which can help their employees protect their nest eggs while saving for retirement.
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.
