The Evidence Is in…Automatic Plan Features Work
Washington, D.C. (PRWEB) June 19, 2015 -- New research from DCIIA shows that defined contribution plan sponsors that use automatic plan features have better participation rates and higher deferral rates for plan participants. Over the period of study, DCIIA has found an increase in the use of automatic plan features, or auto-features; however, the results suggest that some obstacles still remain that limit increased participant savings rates.
The Defined Contribution Institutional Investment Association (DCIIA) has just released the results of its third biennial Plan Sponsor Survey focused on automatic plan features such as automatic enrollment, automatic contribution escalation, and re-enrollment. Key findings include:
• Sixty-two percent of DC plan sponsors report use of automatic enrollment, an increase from 44% in 2010 (results were normalized for comparative purposes).
• While automatic contribution escalation is used by almost half (48%) of survey respondents, this rate of penetration remains unchanged from DCIIA’s last study in 2012.
“In this year’s survey, we sought to analyze the decision-making process around whether or not a sponsor would utilize auto-features,” said Lew Minsky, DCIIA’s Executive Director. “It was interesting to see the use of automatic escalation has leveled off. Large plans sponsors with assets over $200 million were most likely to report that it was too paternalistic. However, on the smaller plan side (below $50 million), 31% of respondents noted that they had never really considered it as an option. This seems to suggest that an opportunity exists to educate sponsors on industry best practices and the benefits of automatically escalating deferrals, requiring employees to “opt-out” of these annual increases.”
This year’s study of over 450 defined contribution plan sponsors identifies both the promise of what is possible as well as the barriers that remain to adoption; and the potential impact these features can enable. These research findings are offered so that plan sponsors, regulators, policymakers, and service providers can encourage more plan sponsors to adopt these “auto-features” and identify ways that perceived barriers can be eliminated.
About DCIIA
The Defined Contribution Institutional Investment Association (DCIIA) is a nonprofit association dedicated to enhancing the retirement security of American workers. Toward this end, DCIIA fosters a dialogue among the leaders of the defined contribution community who are passionate about improving defined contribution outcomes. DCIIA members include investment managers, consultants, law firms, record keepers, insurance companies, plan sponsors and others committed to the best interests of plan participants.
Lew Minsky, Defined Contribution Institutional Investment Association, http://www.dciia.org, +1 (202) 367-1124, [email protected]
Share this article