More people are showing interest in retirement savings, and, according to Deloitte’s 13th Annual Defined Contribution Benchmarking Survey, a lot of it's due to the economic uptick over the past year.
The survey found that average account balances hit an all-time high of more than $95,000 in 2013, up nearly 10 grand from the year before, and that more employees are participating in defined contribution plans -- 6% (77% in 2013 versus 71% in 2012).
More faith in the economy
Among key findings the No. 1 reason for lack of employee participation in defined contribution plans is no longer due to an “uncertain economy/job market” (14% in 2013 compared with 24% in 2012), but instead a “lack of awareness and understanding” (30% in 2013 vs. 21% in 2012).
“Defined contribution plans, both 401(k) and 403(b), now represent the main source of future retirement income for a wide and growing majority of the workforce,” said Stacy Sandler, principal, Human Capital, Deloitte Consulting LLP. “It is imperative that employers and plan sponsors continue to encourage the growing trend in saving for retirement and focus on developing the right tools to educate and engage the workforce. Eighty one percent of respondents identified improving participation education as a top-of-mind issue for a majority of employees.”
Taking it mobile
This year’s survey, conducted with the International Foundation of Employee Benefit Plans (IFEBP) and the International Society of Certified Employee Benefit Specialists (ISCEBS), revealed that transaction processing is supported on mobile devices for just over half (53%) of plans, and only one-in-five (20%) of plans utilize the latest communication methods (smartphones and tablets) to educate employees on retirement readiness.
However, employee satisfaction with hand-held connectivity tools continues to climb, jumping to 61% from 53% in 2012 and 28% 2011, underscoring the point that plan sponsors should continue to evaluate the effectiveness of supplementing traditional communications with going mobile.
Education a key
Plan sponsors are also aware of this reality and consistently rate the No. 1 barrier to a more effective plan as lack of employee understanding (30 %), an unchanged finding from year-to-year. When looking at the top areas of confusion, the study found that employees don’t know what funds to invest in (55%) followed by not knowing how much to save for retirement (35%). “When it comes to education, more is not necessarily better,” said Sandler. “Employers should consider pursuing a simplification strategy designed to deliver the right mix of educational resources to employees based on the demographics of their workforce.”
Making it attractive
According to the survey, companies are also showing renewed confidence in the economy and taking steps to make defined contribution plans more accessible and attractive to employees.
For example, immediate eligibility for matching contributions increased to 62% in 2013 -- up 6 percentage points from 2012. At the same time, 43% of employees cited taking advantage of the company match as the top reason for participation, unseating a personal desire to save for retirement (39%).
“While immediate eligibility for match and automatic enrollment continue to drive employee interest, there is still work to be done,” said Sandler. “Many employees perceive available education tools as too complex and intimidating. Retirement planning is unique for every individual, but many tools are created with a one-size-fits-all approach. Having the ability to recognize the gaps within the system is a solid first step in implementing effective remedies and reaching employees through their preferred channels.”