A higher number of employers are reevaluating their retirement plan designs to attract and retain potential employees, according to new research by Vanguard.
According to the data, in 2021, 72% of plans allowed their participants to begin contributing to the plan immediately upon hire, and 86% allowed for entry within three months of employment.
Vanguard’s research highlights how offering automatic features and matching contributions increases participation and retention among employees. The findings show that nonparticipants were 63% more likely to leave within one year and 76% more likely to leave within three years. Additionally, Vanguard found the participation rate for plans that automatically enrolled participants was 93%, compared to 66% for plans without auto-enrollment.
To encourage employees from leaving their employer, more plan sponsors are adding vesting schedules to their workplace retirement plans. As of 2021, almost half (49%) of employers offer immediate vesting for matching contributions, and only a quarter of all plans had a five- or six-year vesting schedule for matching contributions.
Just over half (56%) of plans implemented automatic enrollment designs as of 2021, and 75% of plans with at least 1,000 participants had offered auto-enrollment designs. Employees who worked for companies that offer automatic enrollment saved nearly 50% more than employees who worked for a firm with voluntary enrollment (10.9% compared to 7.3%).
Ninety-five percent of retirement plans offer a matching contribution, with the average match value being 4.4% and the average nonmatching value being 5.1%.
Forty-one percent of retirement plans offer managed account advice, with more than 8 in 10 of large plans offering these services. Seventy-four percent of participants also had access to in-plan advice. Overall, 74% of participants had access to in-plan advice, finds Vanguard.
Additional findings from Vanguard’s research, “The Changing Workforce Environment: How Employer Plans Can Help Attract and Retain Employees,” can be found here.
SEE ALSO:
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- BoA ‘401(k) Participant Pulse’ Report to Track Participant Confidence
- Participants Increased Savings Despite Uncertainty in 2022
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
