A T. Rowe Price study finds that sponsors of larger 401(k) plans are committed to workers’ retirement security in a broader way than previously thought.
In “HR Perspectives: A Survey of Larger 401(k) Plans,” human resources and benefits professionals administering 401(k) plans with assets of $100 million to more than $1 billion indicated that they are not only taking responsibility for retirement preparedness but are also taking steps to offer a number of automatic programs, matching contributions, stretch matches and other actions to drive successful retirement outcomes.
For instance, 41 percent say helping retirees manage income from their 401(k) is a major strategic goal for their plan, while nearly half (48 percent) say they have a formal metric to track the retirement preparedness of their employees.
Those who track progress toward retirement preparedness report higher usage of various automatic programs, including auto-escalation used by 63 percent of those with a metric, compared with just 52 percent of those without, and periodic enrollment of nonparticipating employees used by 55 percent with a metric, compared with 41 percent without.
In addition to automatic programs, some of the other features sponsors are offering include matching contributions (89 percent of plan sponsors); of that 89 percent, 51 percent offer a traditional matching formula and 38 percent offer a stretch match to encourage higher contribution rates.
Then there are target-date funds, provided by 83 percent of sponsors, not just as a choice but as a qualified default investment alternative (88 percent use them as QDIAs). They’re pretty satisfied with them, too, with 96–98 percent reporting they’re satisfied, and about 60 percent rating their satisfaction as very satisfied.
To try to cut down on plan leakage because of plan loans, hardship withdrawals and cashouts, 58 percent of plan sponsors offer financial wellness programs; 53 percent offer education services that project the impact to account balances at retirement due to leakage; and 47 percent provide debt management tools and services.
Of course, managing such plans into retirement isn’t solely about the retirees, but also about supporting workforce management goals of achieving timely retirement of older workers. And making sure that employees retire at their preferred retirement date is sponsors’ third-highest-ranked major goal of 401(k) plans, with 64 percent choosing that.
“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, says in a statement, adding, “More than a savings plan during working years, the 401(k) is increasingly seen as a plan that needs to serve employees during their retirement.”