Retirement Responsibility Extended for Employers

Helping retirees manage income 'major strategic goal for plan'

401k, retirement, plan sponsor, employeesHow do they ensure the jar is not only full, but replenished?

Forget “to,” more 401k plan sponsors are getting the “through” message, realizing that successful retirement for their employees will require a commitment to help beyond their working years.

An expansive survey from T. Rowe Price finds that plan sponsors feel they have a responsibility to help participants achieve retirement preparedness, and they’re turning to target date funds for help.

The study, titled “HR Perspectives: A Survey of Larger 401k Plans,” reports a broad-based commitment to workers’ retirement security based on the attitudes and actions of retirement plan sponsors.

“Plan sponsors’ behaviors and attitudes clearly indicate the seriousness with which they take responsibility for the retirement security of their plan participants,” Anne Coveney, senior manager of Retirement Thought Leadership, said in a statement. “More than a savings plan during working years, the 401k is increasingly seen as a plan that needs to serve employees during their retirement.

Fully 41 percent of plan sponsors respondents said helping retirees manage income from their 401k is a major strategic goal for their plan. Additionally, almost half of plan sponsors say they have a formal metric to track the retirement preparedness of their employees.

Those who are tracking progress toward retirement preparedness report higher usage of various automatic programs, including auto-escalation used by 63 percent of those with a metric versus 52 percent of those without, and periodic enrollment of non-participating employees is used by 55 percent with a metric versus 41 percent without.

Of the 48 percent who use a formal retirement metric, 52 percent indicate that the metric was provided by their recordkeeper, 25 percent report using a proprietary metric that was developed independently by their company, and 21 percent sourced the metric from their consultant or adviser.

Plan sponsors are positive about recent progress 

Almost two-thirds (64 percent) feel better about 401k participant retirement preparedness compared with two years ago. But the third-ranked major 401k plan goal is enabling employees to retire at their preferred retirement date, which was indicated by 64 percent of sponsors.

“This suggests that the commitment to retirement preparedness is not just about participants,” according to T. Rowe. “It also supports workforce management goals of achieving timely retirement of older workers.”

Matching contributions are offered by 89 percent of plan sponsors; of that, 51 percent offer a traditional matching formula and 38 percent offer a stretch match to encourage higher contribution rates.

Target date funds are widely offered (83 percent of plan sponsors) and with high satisfaction; 96 percent to 98 percent are satisfied with the various types of target date funds with about 60 percent rating their satisfaction as very satisfied.

Target date funds serve as the qualified default investment alternative (QDIA) for 88 percent of plan sponsors that offer target date funds. About half of plan sponsors that offer target date funds report that target date funds are proprietary funds managed by their recordkeeper.

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