Businesses are hiring, employers are using their 401(k) plans to attract better talent, and plan sponsors that dropped their match in the wake of the financial crisis are re-implementing them, according to the Transamerica Center for Retirement Studies annual survey.
Seventy-two percent of the employers surveyed reported having hired new employees in the past year, the center said. And of those employers that do sponsor a defined contribution plan, 89 percent believe their plans are important to the effort to attract top talent.
The number of employers offering plans jumped from 72 percent to 79 percent between 2007 and 2014, the center said. Among companies with more than 500 employees, 98 percent now offer plans. About 95 percent of small employers (100 to 499 employees) offer plans, and 73 percent of micro companies (10 to 99 employees).
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In 2014, 77 percent of plan sponsors offered a match, an improvement from the 70 percent low in the wake of the financial crisis, and almost at pre-recession levels, when 80 percent of sponsors offered a match, it said.
Improvements aside, more can be done, it said.
"Until every American worker is on track to achieve a financially secure retirement, there will be opportunities for further innovation and refinements to our retirement system," said Catherine Collinson, president of the Los Angeles-based nonprofit.
The survey offered five ways employers, plan advisors and plan providers can improve 401(k) plans.
1. Adopt automatic plan features to increase savings rates
According to the TCRS study, 29 percent of sponsors offered automatic enrollment in 2014, up from 23 percent in 2007. With large companies, 55 percent automatically enroll participants; 27 percent of small companies do; only 21 percent of micro companies auto enroll.
2. Incorporate professionally managed services and asset allocation suites
Most sponsors (84 percent) offer some form of managed account services: 56 percent offer target date funds; 54 percent offer target risk funds; 64 percent offer managed accounts with advisors directing allocation strategies.
3. Add the Roth 401(k) option to facilitate after-tax contributions
Roth 401(k) features increased to 52 percent in 2014, from 19 percent in 2007.
Contributing some assets to Roth 401(k)s can reduce the tax exposure participants incur in retirement with they take pre-tax distributions from their 401(k).
4. Extend eligibility to part-time workers to help expand retirement plan coverage
Less than half (49 percent) of plan sponsors extend eligibility to part-time workers.
"A tremendous opportunity for increasing coverage is through part-time workers," said Collinson.
It may be that RIAs to plan sponsors could be the best advocates for that option.
5. Address any disconnects between employers and workers regarding benefits and preparations
The survey found a disconnect between how sponsors and participants perceive their plans. Almost all sponsors (95 percent) say their employees are satisfied with their plans, but only 80 percent of employees actually claimed to be.
Only 23 percent of employers have actually surveyed their participants regarding their retirement plans. Only 11 percent of participants consulted with the HR departments regarding their plans last year.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
