A new report from the Transamerica Center for Retirement Studies suggests that workers and employers generally agree on the importance of workplace-provided benefits. Specifically, 89 percent of surveyed workers and 84 percent of employers said that they view a 401(k) or similar retirement plan as an important benefit. Workers, though, were slightly more likely than employers (60 percent vs. 53 percent) to view such benefits as being “very important.” Regardless, nearly three in every four surveyed employers said that they currently offer a 401(k) or similar plan to their employees, although providing such a benefit was much more common among larger employers (92 percent for companies with 500 or more employees compared to 72 percent for businesses with 10 to 99 workers). Only 38 percent of employer respondents said that they extend 401(k) eligibility to part-time workers, and among the surveyed plan sponsors who reported that they do not extend eligibility to part-timers, 91 percent said that they do not plan to do so in the future. When asked why, 39 percent of these employers said that doing so would be “impractical,” 37 percent cited cost concerns, and 33 percent pointed to high turnover among part-time workers.
To help workers better prepare for retirement, 41 percent of large companies said that they have incorporated automatic enrollment into their 401(k) plan design but only 18 percent of micro companies (10 to 99 employees) reported doing the same. Among plan sponsors with automatic enrollment, the median default contribution rate was 3 percent even though many industry experts believe that this is inadequate for funding an individual or family’s retirement. Automatic escalation can address this problem and 43 percent of large companies reported that they automatically increase their participants’ contributions annually, compared to 26 percent at both micro and small non-micro companies (100 to 499 employees). Workers clearly like such plan features because 71 percent of surveyed employees said that they find the idea of being automatically enrolled in a 401(k) or similar retirement plan to be appealing, and the median worker respondent reported that they would be comfortable with a starting contribution rate of 6 percent. Moreover, two-thirds of surveyed employees said that they would be likely to take advantage of an automatic escalation feature that would regularly raise their annual contributions by one percent of their salary. The report’s authors argued that such responses should encourage plan sponsors to adopt automatic features which can help drive up savings rates among employees.
Sources: Transamerica Center for Retirement StudiesPost author: Charles Couch