By Cyril Tuohy
Three out of four retirement plan sponsors offered employees access to outside investment advisors to help them plan for retirement, a 2013 survey by the benefits consulting firm Aon Hewitt has found. The study looked at more than 400 plan sponsors, representing 10 million employees.
Of the plans offering outside investment advice, 59 percent offer one-on-one financial counseling, 55 percent provide online guidance, 52 percent make available managed accounts and 46 percent offer online advice, the survey found.
The results are contained in the survey titled “2013 Trends & Experience in Defined Contribution Plans: An Evolving Retirement Landscape.”
“Different segments of the workforce prefer various forms of help,” said Robert Austin, director of retirement research for Aon Hewitt.
Some workers prefer to “simply hand over the keys,” and let online algorithms or advisory services do the work for them, he said. This was also the reason for the growth in managed accounts. In 2011, only 29 percent of retirement plan sponsoring companies offered managed accounts.
A target-date fund, a form of managed account, automatically rebalances an investment portfolio depending on the year an employee plans to retire. Target-date funds are offered by 86 percent of plan sponsors, the survey also found.
Other employees prefer a more active role in directing investments and altering contribution levels within their retirement plan accounts themselves.
“Many employers are responding to this diversity by offering a spectrum of support, which should ultimately provide the most participants with the expert resources they need to improve their retirement readiness,” Austin added.
As defined contribution retirement plan models become the de facto pillars of employee retirement, more workers are seeking the advice or suggestion of expertise – either real or computer-generated – to help them. Earlier this year, the teachers’ retirement fund giant TIAA-CREF said it planned to increase the number of advisors to help guide customers.
Defined contribution programs were the primary source of employee retirement income for 77 percent of employers surveyed, Aon said.
The Aon survey also found more employers boosting their match, with 19 percent of employers reporting a dollar-for-dollar match on the first 6 percent of employee salary deferrals, an increase of 9 percentage points from 2011.
In the past, a match of 50 cents per $1 on the first 6 percent of salary deferral was the standard employer contribution.
Nearly 98 percent of all employers offer some sort of contribution to a retirement plan, Aon also said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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