Most U.S. Employers See Retirement Readiness as a Significant Issue for Employees, Towers Watson Survey Finds
19 Novembre 2014 - 3:05PM
Business Wire
Despite employers embracing 401(k) plan automatic features,
target-date funds and education, retirement readiness worries
remain
More than three-quarters of large and midsize U.S. employers
that sponsor 401(k) and 403(b) defined contribution (DC) plans say
retirement readiness has become a major issue for their employees,
according to a new survey by global professional services company
Towers Watson (NYSE: NASDAQ: TW). A vast majority of plan sponsors
have taken steps to meet this growing challenge by boosting their
savings and investment education programs, and continuing to
embrace automatic features and target-date funds for their DC
plans. However, concerns about retirement readiness are
prevalent.
According to the Towers Watson 2014 North American Defined
Contribution Plan Sponsor Survey, 78% of the 457 U.S. employers
surveyed say retirement readiness has become a top issue for their
employees. Additionally, 82% say retirement security will become a
more important issue for employees in the next three years.
Employers understand that more education is necessary. A mere 12%
of respondents say employees know how much they need for a secure
retirement, while only 20% believe their employees feel comfortable
making investment decisions. More than half of the respondents
(53%) are also concerned about older workers delaying
retirement.
“In a world where DC plans are becoming the primary
company-sponsored retirement program, retirement readiness has
become a major concern for employers. Unfortunately, most employers
have not yet moved the needle in preparing their workers for a
financially secure retirement,” said Robyn Credico, Defined
Contribution practice leader, North America, at Towers Watson.
“Getting employees to understand their savings needs and feel
comfortable about retirement remains a significant challenge. New
plan features alone are not the answer. If employers are to make
progress, they must also rely heavily on education and
communication so their employees know their options and make
informed savings decisions.”
The most common plan features include simple but diverse
investment lineups, and automated enrollment and deferral features
with flexibility for pre-tax and after-tax contributions. Yet
participants do not always take advantage of the solutions that
would optimize their retirement readiness. More than half of the
respondents (54%) offer an automatic increase feature for
participants’ contributions annually, but only 28% mandate it.
While more than half (54%) offer an option to make Roth
contributions, less than 11% of their employees take advantage of
these features.
Health savings accounts (HSAs) are another tax-efficient vehicle
for retirement savings. Virtually all companies (99%) that offer
HSAs and DC plans allocate the contributions separately. Of those
that offer HSAs, only 19% specifically educate their workers on the
wealth accumulation benefits of a DC plan versus an HSA.
In support of more effective solutions, sponsors continue to
simplify the investment offerings to align with participant needs.
Two-thirds (66%) offer between 10 and 19 investment options, and
86% of respondents use target-date funds as their default
option.
“We are very encouraged that most employers say they are
committed to providing more education to their employees on
retirement saving and investing,” said Jill Kleiner, senior
consultant at Towers Watson. The survey noted that the majority of
employers (61%) continue to focus their retirement education
programs on traditional, passive methods, including account
statements, newsletters, group meetings and online webcasts. Less
than 10% use mobile apps extensively or have tried gamification,
which uses game design to motivate employees to achieve savings
goals.
“With concern over retirement readiness at such high levels,
many employers face the risk of having older workers delay
retirement. These delayed retirements can weaken productivity,
since employees who stay on the job because they cannot afford to
retire are more likely to be less engaged and productive than other
workers. To minimize this possibility, employers should
measure the effectiveness of their plans in meeting retirement
goals and, if necessary, determine opportunities where various
design, investment and communication features can be used more
effectively to optimize the overall program. These efforts will
need to be balanced with the benefit plan cost constraints most
employers have,” said Credico.
About the Survey
The Towers Watson 2014 North American Defined Contribution Plan
Sponsor Survey was conducted in June and July 2014, and includes
responses from 457 large and midsize U.S. companies that sponsor a
DC plan.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global
professional services company that helps organizations improve
performance through effective people, risk and financial
management. With 15,000 associates around the world, the company
offers consulting, technology and solutions in the areas of
benefits, talent management, rewards, and risk and capital
management. Learn more at towerswatson.com.
Towers WatsonEd Emerman, +1
609-275-5162eemerman@eaglepr.comorBinoli Savani, +1
703-258-7648binoli.savani@towerswatson.com
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