A new study by kasina, a financial services consulting firm, outlines ways to increase enrollment and participation in defined contribution retirement plans.

"While two-thirds of plan sponsors rate enrollment and contribution levels as the most important factor in determining the success of a plan, those rates remain well below optimal in most defined contribution plans," said kasina's Michael McLaughlin, one of the study's principal authors. Often, employees have no knowledge of the firm running their company's retirement plans. This, kasina notes, provides an opportunity for improving plan services.

A key finding of the study is that plan providers have little or no demographic data of participants because they do not make enough of an effort to establish a communicative relationship with plan sponsors. Such data would help them initiate contact with and promote products and services to participants who are likely to embrace them.

For instance, by having access to information about employees' marital status, providers could encourage newly married employees to increase contributions to a savings program. But often, providers do not seek access to this data. The end result is that just 75% of eligible employees participate in the 401(k) plans sponsored by their companies, according to a recent study from Deloitte.

The kasina study recommends a four-step process to improving employee participation: partnering with the sponsor, understanding employee needs, generating communications and measuring effectiveness. Among the several best practices already prevalent in the industry, kasina endorses promoting automatic enrollment, promoting sponsor matching and integrating key personnel to facilitate the logistics of setting up and managing the plan.

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