One-on-one meetings, automatic enrollment and a variety of plan options drive up employee participation in retirement plans, according to a new report by The Principal Financial Group.
The report, "The Total View 2011" analyzed retirement savings trends among retirement plans with services provided by The Principal and third-party research. The report is geared toward plan sponsors and financial professionals to help them track retirement trends and benchmark their plans.
"We're seeing participants shift their focus from getting back to where they were to taking steps to get to where they need to be to reach their financial dreams," said Barrie Christman, vice president of individual investor services at The Principal. "That's why we've built this year's report around best practices for 'retirement readiness': enhancing participant engagement to help influence more successful outcomes."
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The report found that education meetings help drive better outcomes. Plans that included one-on-one planning sessions saw higher participation and deferral rates from participants than those without the service. It also found that group meetings drove up participation rates by 5.5 percentage points over those who did not have access to meetings.
Plans that offer automatic enrollment and automatic escalation features had the highest participation rate at 78 percent, more than 19 percentage points higher than those without those features, the study found. Nearly twice as many participants reached an overall contribution rate – including any employer match – greater than 11 percent when their employers' plan default was 6 percent rather than 3 percent.
"In order to help ensure sufficient retirement income, we believe most retirement plan participants should be saving 11 to 15 percent of their pay—including any employer match—throughout an entire working career," Christman said.
Participation in defined-contribution plans is 11 to 13 percent higher among highly compensated employees and 3 to 5 percent higher for non-highly compensated employees when combined with a nonqualified retirement plan versus a standalone defined-contribution plan, the report found. Average salary deferral percentages and account balances are also higher for both groups when the two plans exist.
The Principal Financial Group is a retirement and global investment management leader. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies.
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