While getting their employees to participate in the 401(k) plan continues to be a concern of sponsors, they are increasingly interested in making sure that these employees invest their money wisely, according to a plan sponsor survey by Hewitt Associates.
Only 25% in 2006 viewed a high participation rate as the primary measure of their 401(k)’s success, down from 43% the year before. Instead, the main concern has become helping employees have sufficient retirement income.
Last year, 34% automatically enrolled employees in their retirement plan, up from 19% in 2005. Of those that do, 77% use a diversified fund as the default, such as a target-date, target-risk or balanced fund. In 2005, only 39% made such a fund the default.
In addition, 83% set the default contribution rate at 3% or higher, compared to just 66% two years ago, and 42% offer automatic rebalancing, up from 26% in 2005 and only 11% in 2003.
Employers are also increasingly concerned about 401(k) plan fees, with 61% saying they are very or somewhat concerned about expenses. In 2006, 60% attempted to calculate their plan’s total costs, up from 34% in 2003, and 57% have made an attempt to reduce fund expenses in the past two years.
“It’s obvious that today’s employers understand that the majority of their employees take a back seat in managing their retirement,” said Pamela Hess, director of retirement research at Hewitt. “This is why we continue to see a steady number of companies putting their 401(k) plans on autopilot and adopting features like automatic enrollment. As a result, they are shifting their priorities from basic enrollment to quality enrollment.”