Employers Focus on Employees’ Retirement Readiness

Plan sponsors identified employees’ retirement preparedness as one of their top priorities in 2010, according to Deloitte Consulting’s Annual 401(k) Benchmarking Survey for 2010. Nearly two-thirds of the 650 employers responding said that they have a responsibility to take interest in whether employees are sufficiently prepared for retirement.

Only 15 percent of sponsors said most employees will be sufficiently prepared financially for retirement.

Participants were cautious
Adding to sponsors’ concerns were recent participant activities.
The most common actions taken by participants in the previous
12 months were:

• Decreased deferral rates (seen in 41 percent of plans)
• Increased loan activity (41 percent)
• Increased withdrawals (49 percent)
• Rebalancing to less aggressive portfolios (21 percent)

Eligibility requirements were eased
To make it easier for employees to participate in their employer’s retirement plan, 56 percent of responding sponsors had no service requirement for enrolling in the plan, and 42 percent had no minimum age requirement.

Almost 50 percent said their plans included automatic enrollment, and 47 percent noted a higher average contribution rate as a result.

Automatic contribution escalation was a feature in 44 percent
of plans, but less than 10 percent of participants were using it.

Contribution rates were fairly steady
Deferral rates for highly compensated employees remained unchanged from the previous year, averaging between six percent and eight percent. The average rate for non-highly compensated employees fell from the six percent to eight percent range to the four percent to six percent range.

Investments received attention
In the latest survey, sponsors reported offering 20 investment options, which is about the same as the previous year.

Almost two-thirds reported that they review investment performance on a quarterly basis.

In the past year, nearly 40 percent of plans had replaced a fund due to poor performance.

More than half (51 percent) offered individual financial counseling and/or investment advice to participants.

See the complete survey.

Pension Plan Limitations for 2011

401(k) Max. Participant Deferral-- $16,500*
(*$22,000 for those age 50 or over, if plan permits )

Defined Contribution Max. Contribution --$49,000

Highly Compensated Employee--$110,000

Annual Compensation Limit--$245,000

For a complete list of the Internal Revenue Service’s dollar limitations from 2000 to 2011, click here. 

Useful Items
on the Web

The Internal Revenue Service's 401(k) Checklist and the 401(k) Fix-It Guide

Profit Sharing/401(k) Council of America's 52nd Annual Survey of Profit Sharing and 401(k) Plans

Databook on Employee Benefits

Department of Labor, Employee Benefits Security Administration
www.dol.gov/ebsa

401(k) Help Center
www.401khelpcenter.com

BenefitsLink
www.benefitslink.com

Profit Sharing/401(k) Council of America
www.psca.org

Employee Benefits Institute of America
www.ebia.com

Employee Benefit Research Institute
www.ebri.org