It’s interesting to compare changes year by year, but over time is when real results emerge. That’s often true in retirement plans; while there may be small incremental changes in enrollment, investments and plan design one year to the next, comparing decades can be much more illuminating.
One example is the popularity of target-date funds. Examining their data, Vanguard found a gradual uptick, usually 3% to 4% each year, in the number of participants holding a single target-date fund for most years between 2008 and 2016—good, but not startling.[1]
Yet by the end of 2017 these small increases added up significantly when compared to the previous decade: the percentage of participants invested in a target-date fund had reached 75%, and 9 of every 10 plan sponsors included them among the available funds.[2]
It isn’t often that plan sponsors and industry professionals who watch the trends are startled by year-over-year changes in benchmarks such as matching contribution levels. To the contrary, participation levels, Roth provisions, and auto features in 401(k) plans continue to gain modestly, while plan fees creep downward.
However, there was a surprise in 2018. In a longtime, industry-standard benchmarking survey, companies seemed far more willing to claim responsibility for employee financial wellness than they were a year earlier. Typically, when asked whether their organization had responsibility for employee financial wellness, the response from employers was about 25% saying yes, 25% saying no, and 50% remaining neutral. But for 2018, 58.4% said yes, 1.8% said no, and 39.7% remained somewhat neutral.[3]
Nearly half of employers auto enroll at 3%+ initial deferral rate
Employers continue taking practical steps to reach the goal of financial wellness for employees, whether through plan features or through tools and education (or both). The same study found that by 2018, 47.5% of plans automatically enrolled employees in their 401(k) plans at an initial deferral rate higher than 3% of pay. Six years earlier, 35% of employers enrolled automatically at a rate higher than 3% of pay.
The most popular means of bringing financial advice to employees is offering one-on-one meetings with financial advisers, the survey found, with 46.5% of employers doing so. Most commonly, the types of financial education or guidance offered were savings strategies (43.5%), investing basics (35.8%), and credit/debt management (17.9%). 27.8% offered access to help for new hires rolling into the plan and 26.3% offered help for newly separated employees rolling out of the plan.
The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law, or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.
MMA New England is a part of Marsh & McLennan Agency LLC (MMA). Securities offered through MMA Securities LLC (MMA Securities), member FINRA / SIPC, and a federally registered investment advisor. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000. Variable insurance products distributed by MMA Securities LLC. MMA and MMA Securities are affiliates owned by Marsh & McLennan Companies.
1. How America Saves 2018: Vanguard 2017 defined contribution plan data
