By Cyril Tuohy
A new survey by Transamerica Retirement Solutions finds that employers and advisors see retirement plans as a tool to help employees prepare for retirement rather than a way for employers to recruit new workers or retain their existing workforces.
The survey, titled “Report on Retirement Plans 2013: The Road to Retirement Readiness,” found that 41 percent of respondents said helping employees accumulate retirement income is the primary goal of the plan, an increase of 7 percentage points from 2012.
“While it’s promising to see plan sponsors moving toward encouraging a retirement-ready workforce, there are still many obstacles to overcome,” said Laura Gaynor, vice president and corporate plans practice leader of Transamerica Retirement Solutions.
In the past many employers offered retirement plans as an incentive to attract the most highly skilled workers. Retirement plans were considered “extras” like disability insurance, vision or dental coverage benefits.
But the survey found that more employers consider retirement plans a necessity for workers who seek a better standard of living in retirement. The ease and convenience of the payroll deduction means very little sacrifice as workers “forget” about the money they put away.
Gaynor also said that employers could help ensure participants meet their retirement goals by increasing the initial default contribution rate to at least 6 percent, and then implement automatic contribution increases.
During the second quarter, Transamerica surveyed more than 250 managers responsible for the administration of retirement benefits in companies with at least 1,000 employees. Each of the companies offered defined-contribution plans and 79 percent offered an active defined-benefit plan.
The survey found that nearly half (48 percent) of the 401(k) plan sponsors have implemented automatic enrollment, and 31 percent have adopted automatic contribution increases. Employees are eligible to opt out, but once enrolled only 10 percent choose to do so, the survey also found.
The number of 401(k) plans offering more than 15 investment choices has dropped by 4 percentage points. Providing easy access to saving and investment guidance online has encouraged employees to take action with regard to employer-sponsored retirement.
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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