Employers doubt retirement readiness of 401(k) participants, Towers Watson reports


The vast majority of U.S. employers lack confidence in the retirement readiness of their 401(k) plan participants, according to a new survey by Towers Watson. The Towers Watson 2012 Defined Contribution Plan Sponsor Survey was conducted in April and May of 2012. A total of 371 401(k) plan sponsors with more than 1,000 employees and $10 million or more in plan assets participated.

More than half of respondents surveyed (56%) reported employee participation levels at or above 80% this year, compared to 50% two years ago. The higher participation rates are primarily the result of employers using automatic enrollment, with nearly two in three respondents (65%) now using this feature, compared to 51% in 2009. To encourage adequate participant savings rates, 71% of those that use auto-enrollment also use automatic contribution escalation, which allows a gradual increase in contribution levels over a certain period of time. Employers are also becoming more transparent about fees, the survey found, with more companies now charging participants direct, equal-dollar recordkeeping fees. One-third of respondents now pay recordkeeping fees through revenue sharing, which represents a decline from 42% in 2009.

Despite these efforts, the survey reveals significant employer concern that their DC plans are both underutilized and misunderstood by their employees. Only one in five respondents (22%) believe employees generally make informed decisions about their retirement savings, and only 26% believe their employees have realistic expectations about what DC plans can provide. Nearly one-half of respondents (48%) expect a greater number of older workers will ultimately delay retirement.

Source: Towers Watson press release, October 4, 2012.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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