As the pandemic continues to impact many aspects of people’s lives, employers are more committed than ever to ensuring their employees save for retirement and are financially secure, according to a new report by Alight Solutions (NYSE: ALIT), a leading cloud-based provider of integrated digital human capital and business solutions.
While participation rates remain statistically unchanged at 82%, employers are ramping up efforts to raise that number and boost the balance in participants’ retirement accounts, according to Alight’s 2021 Trends & Experience in Defined Contribution (DC) Plans report. One of the most effective strategies for achieving that goal, automatic features are growing in popularity. Nearly three-quarters (73%) of plans have adopted automatic enrollment and 67% also have an auto-escalation feature.
Despite the economic turmoil of the last two years, employers are increasingly offering matching contributions to help employees build their retirement funds. Nearly two-thirds (61%) of plans match on a dollar-for-dollar basis, with the most common matching formula being dollar-for-dollar on 6%. One-quarter of all plans with auto-escalation have adopted a 15% ceiling for contribution escalation.
“Employers are taking important steps to make sure that people are saving and investing their money,” said Rob Austin, head of research at Alight. “For most employees, especially those who get started on day one with automatic enrollment, those steps should help put them on a good path to having a sizeable nest egg when they’re retirement eligible.”
Employers are also allowing employees to utilize tax-advantaged savings vehicles and providing professional investment assistance to help them make smart decisions. The percentage of plans allowing for Roth contributions increased from 78% in 2019 to 86% in 2021. The majority of employers offer investment advisory services like managed accounts (62%) and one-on-one financial advice and guidance (56%), and these services continue to receive high marks, with 99% of employers rating them as effective in helping people save and invest across their financial lives.
“Employers want their employees to have the confidence and resources to make wise financial decisions in order to save adequately for retirement and improve their overall financial wellbeing,” said Austin. “They’re basically saying, ‘we’re going to let you save however you want to save and do everything we can to help you grow that money.”
The Trends & Experience in Defined Contribution Plans survey has been conducted every two years since 1991. This year’s survey was completed by 263 large U.S. employers with 77% employing at least 1,000 people. The average plan assets totaled $4.69 billion.
For more information and to access the complete report, please visit alight.com.