For this report, Northern Trust and Greenwich Associates interviewed 45 DC plan sponsors at some of the largest companies in the United States and 11 leading defined contribution investment consultants.

While most plan sponsors expressed confidence in their plan's ability to prepare younger workers for retirement, nearly 40 percent of plan sponsors and a majority of consultants interviewed were neutral or less than confident on that question. The study indicates that plan sponsors could take a number of steps in the near, medium and longer term to better engage these younger workers:

• Segment plan participants by age groups (near-term) – Only 4 percent of plan sponsors participating had established specific goals for engaging younger workers in their DC plans, and just 24 percent have strategies aimed at increasing participation by different age groups.
• Tailor education plans to participant needs (near-term) – Plan sponsors reported that under-35 workers lag their older colleagues in both participation rates and contribution levels; respondents also noted that younger workers are typically more receptive to new media such as social networking as an education tool.
• Reduce 'leakage' from cash-outs and loans (near term) – 91 percent of plan sponsors allow participants to take loans on their retirement savings, and participants under age 35 were more likely to have loans outstanding.
• Implement more auto plan features (medium-term) – 86 percent of respondents say that auto-enrollment, auto-escalation and similar features have proven effective for younger employees.
• Align target retirement date funds with participant needs (medium-term) – Under-35 employees are highly likely to select the target date investment option. Plan sponsors should profile their participants – based on age and savings demographics, other retirement benefits and risk tolerance, among others – and select a glidepath that most closely matches that profile.
• Require participation (long-term) – 63 percent of those participating in the study believe DC plan participation should be mandatory, which would have a disproportionate impact on younger workers, who enroll at lower rates than those over age 35.

"Setting goals and building marketing strategies to reach these younger workers is a critical early step in improving DC plan funding effectiveness," said Jim Danaher, managing director of the Defined Contribution Solutions Group at Northern Trust. "Workers who wait until the age of 40 or older to begin saving for retirement very likely will fall short of their financial goals. By contrast, workers who begin participating in DC plans in their 20s or even early 30s have an opportunity to achieve their goals—if they stay engaged and make the right decisions."

Northern Trust Corporation provides investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide.