BlackRock, the world’s largest investment firm with $4.6 trillion in assets under management, has released its findings from its annual review of the defined contribution market.

The picture painted, Retirement Readiness: A work in progress, shows the efficiency of modern workplace plan design leaves much to be desired.

Perhaps most notable is the disparity in how sponsors and participants perceive the functionality of the typical 401(k) plan.

Take for example the basic question of how much participants need to be saving to fund an adequate retirement nest egg.

Of the 200 plan sponsors surveyed, 64 percent reported that their participants have a good understanding of how much in savings should be deferred from salaries.

But far fewer participants—37 percent—told BlackRock they were confident in knowing how much to save.

Even more sponsors—67 percent—said participants were well educated on investment options, while only 43 percent of participants agreed with their employers. Nearly one-fifth of the more than 1,000 participants surveyed said they don’t understand the investment options in plan menus.

Only 35 percent of participants claimed to be informed when it came to their plan’s automatic deferral features—about half the number of sponsors said were adequately educated on automatic features.

And on where the rubber meets the road—the question of how many participants are well prepared for retirement—sponsor and participant disparity was perhaps most glaring in BlackRock’s survey.

A majority of sponsors—59 percent—say the majority of their participants are saving enough for retirement.

Yet only 28 percent of participants believe they are.

Read: 3 retirement plan sponsor issues to work on in 2016

Despite sponsors’ apparent overestimation of participants’ familiarity with retirement plans’ functionality, about half of sponsors said their “organization is facing an impending retirement crisis where participants will keep working because they are unable to afford to retire.”

The highlights of the dissonance between participant and sponsor perspectives speaks to underlying problems in plan communication and education efforts, suggested Anne Ackerley, head of BlackRock’s defined contribution group.

“Employers generally recognize that employees are under-prepared for retirement, but in some ways the problem runs far deeper than they realize,” said Ackerley.

One-quarter of plans made auto escalation automatic last year, and another quarter of sponsors added the feature with the option to opt-out.

An area of parity between participants and sponsors exists in the area of plan communications, the report found.

Which is to say, existing communications, and restrictions on what can be communicated, are failing many savers: 45 percent of participants said communications don’t help inform them on the right savings direction; 49 percent of sponsors said that by the time they have delivered legally required communications, few options remain at their disposal.

Instant Insights /

Divide between 401(k) participants and sponsors, study shows

More From HR Executive

Related Stories

Recommended For You