Employers are expanding the scope of their 401(k) plans with increased matching contributions, relaxed eligibility rules and access to expert advice, an Aon Hewitt survey released Wednesday said.
Three-quarters (77 percent) of the more than 400 employers surveyed said a defined contribution plan was the primary retirement vehicle offered to their employees. The most frequent reasons given by employers when asked how they define the success of their DC plans were "facilitates adequate retirement income" (18 percent) and "high participation rate" (17 percent).
Nearly all of the surveyed employers (98 percent) – who collectively represent more than 10 million workers and $500 billion in retirement assets – contribute in some way to employee accounts. The company match to employee contributions is on the rise. The most popular match was $1 for every $1 up to 6 percent of salary with one-fifth (19 percent) of employers matching at that level, up from 11 percent in 2011. A 50-cents-on-the-dollar match had been the most popular rate in the past, Aon Hewitt said.
“In the 20 years we've been doing this study, this is the first time we saw the most common match increase,” Rob Austin, director of retirement research at Aon Hewitt, said in a statement. “Our experience shows that almost three-quarters of employees save at a level equal to or above the company match threshold.”
Since 2001, the survey found that the percentage of employers allowing contributions to DC plans from the first day of employment has increased from less than half (45 percent) to nearly three-quarters (71 percent).
Austin said the increasing frequency with which workers change jobs has made employers turn to retirement benefits as a recruitment tool.
Another way employers (75 percent) are trying to help employees better prepare for retirement is by offering access to financial services. According to the survey, he most commonly offered services were: one-on-one financial counseling (59 percent); online guidance (55 percent); managed accounts (52 percent); and online advice (46 percent).
Other areas in which employers have changed their retirement plans include simplifying and improving investment choices and allowing contributions to Roth IRAs. Fifty percent of employers said they allow such contributions, up from 11 percent in 2007.