Gaps, shortfalls in retirement benefits offerings exposed in new survey

A new survey from Transamerica Institute underlines gaps in U.S. employers’ health and retirement benefits offerings and highlights how perceptions of available benefits can vary between employers and employees.

“Emerging from the COVID-19 Pandemic: The Employer’s Perspective,” a survey created in collaboration with Transamerica Center for Retirement Studies, shows the impact of the pandemic on employers and how they have adapted to the new landscape. More than 1,800 for-profit companies participated in the survey, including small, medium and large businesses. The results cast a spotlight on emerging benefit offerings and where they still fall short of workers’ expectations and needs, in part through comparisons with an earlier Transamerica survey of workers.

The survey reflects that the pandemic has prompted employers to take a look at their benefits with fresh eyes. According to the survey, 56% of employers have reevaluated their health, retirement and other employee benefit offerings since the pandemic began, including 83% of medium companies and 81% of large companies. The chief reasons cited for that reevaluation include aligning with employee’s current needs (30%), becoming more competitive (25%) and reducing costs (22%).

Among the survey’s key findings is current shortcomings in small companies’ retirement benefits to fully meet their employees’ needs. Only 46% of small companies, which are defined as those with fewer than 100 employees, offer a 401(k) or similar employee-funded plan. That compares to 92% of larger companies (500+ employees) and 89% of medium companies (100 to 499 employees). However, there are promising signs for improvement as 43% of employers that do not offer a plan say they likely will start a plan in the next two years.

Unsurprisingly, retirement savings are much more robust for workers at large companies than at small companies, demonstrating the impact of employer-sponsored retirement plans. According to Transamerica, workers of large companies have saved an estimated median of $96,000 in total household retirement accounts and those of medium companies have saved $73,000, while small-company workers have saved just $41,000.

Related: Setting your employees up for savings success

“Employer-sponsored retirement plans, including 401(k)s and similar plans, have proven to be the most effective way to facilitate long-term savings among workers. Unfortunately, not all workers have access to these benefits, especially those working for small companies,” said Catherine Collinson, CEO and president of Transamerica Institute and the Transamerica Center for Retirement Studies, in a press release.

Overall, 74% of companies said they feel responsible for helping their team members achieve a financially secure retirement, though just 39% cite retirement benefits as being very important to attracting and retaining employees. Transamerica’s numbers show that workers highly value retirement benefits with 89% saying a 401(k) or similar plan is important and 78% saying a defined benefit pension plan is important.

Employers slow to embrace auto enrollment

Those employers who do offer a retirement plan have been slow to embrace automatic enrollment, which automatically enrolls employees into the employer-sponsored plan and gives them the option to opt out. The convenience of automatic enrollment makes it much more likely that employers will join the plan. However, only 23% of companies with a retirement plan use automatic enrollment, according to the survey.

Transamerica’s survey highlighted a striking difference in how employers and employees view the prevalence of age-friendly policies in the workforce. In particular, 84% of employers said they consider their companies to be age-friendly, but only 65% of the workers surveyed said their employers were age-friendly. Just 34% of employers surveyed have a diversity and inclusion policy statement with a specific reference to age.

However, more promisingly, 92% of employers offer at least one type of alternative work arrangement, such as flexible work schedules (60%) and the ability to work remotely (51%). In addition, 80% offer one or more programs to support caregiving employees, though more offer an unpaid leave of absence (37%) than a paid leave of absence (31%). Meanwhile, a minority of employers so far have adopted some emerging best practices to help workers transition to retirement, including just 31% providing a formal phased retirement program, 44% offering access to a financial advisor and 41% offering education about managing the transition.

“Today, four generations in the workforce bring diverse skills, expertise and life experiences to their jobs,” Collinson said. “Employers that implement best practices for a multigenerational workforce can potentially increase productivity while supporting the professional growth and work-life balance of their employees.”