Employers are taking a more engaging and firm approach to making sure employees take retirement saving seriously, making use of automatic enrollment and escalation, as well as personalized tools. And both employers and retirement plan providers are noting changes in the savings attitudes of employees.

In a year-long period that ended in June, Bank of America Merrill Lynch reported the number of 401(k) plans combining auto enrollment and auto increases grew by 19% over the prior year, with 213 of its plans now using these features in tandem.

Data from the Plan Sponsor Council of America’s 56th annual survey of 401(k) and profit sharing plans, meanwhile, show that 47.2% of plans have an automatic enrollment feature, with 39.8% of those reporting they also automatically increase participants’ default deferral rates over time.

Kevin Crain, a senior relationship executive with Bank of America Merrill Lynch, says partnerships between 401(k) plan sponsors and providers are key to automatic enrollment success, and that companies are pushing harder to incorporate automatic increases as well.

“Because auto enroll has worked, companies are being more aggressive,” Crain says. “They’re auto enrolling people at a higher initial default [rate]. Instead of 3%, they’re starting at 4%, 5% or 6%, which maximizes the possibility of getting company matches. Also, companies are getting aggressive to put automatic increases right alongside. So [even] if they do nothing but sit there, they’re still going to be bumped along to probably get to a 9% or 10% saving level for themselves.”

LSG Sky Chefs, a Texas-based provider of airline catering and management, has used auto enrollment features and has seen the participation rate in its 401(k) plan jump to 72% among eligible employees. 

Also see: Stalling retirement savings costs big for employees

“The only pushback we’ve gotten is from employees wanting to get into the plan before the 30-day mark,” says Melanie Swenson, senior HR specialist, retirement plans and communication. “They see it as one less thing to worry about,” she adds. “They don’t have to remember to go back and sign up.”

Kathryn Baikie, director of total rewards at LSG Sky Chefs, adds that employees know up front about the auto enroll feature through the benefits-at-a-glance discussion during the interview process. “Part of the recruiting package is showing what we’re offering them as far as retirement saving,” she says.

Still, automatically enrolling employees isn’t going to be the end-all tool for engaging workers in healthy retirement savings habits. As Crain points out, only about 50% of companies are embracing the technique, “which means there are 50% that haven’t adopted auto enroll,” he says.

“I think the auto programs have proven to be the most effective,” says Joe Ready, director of institutional retirement and trust with Wells Fargo. “I think the auto programs allow you to create a program to get people in. If you can just get people started at a young age, it’s never too late. $1 today is going to serve them well tomorrow.”

Written plans

Another habit plan sponsors can impress on employees is the importance of a written plan, Ready says. “I think when people hear ‘written plan,’ they think about a long, detailed financial plan. A simple plan can be: How much do you have? Just start the journey,” he says.

For Wells Fargo employer-clients, for example, retirement plan messages are integrated with Social Security information.

“Every employee knows where they are on their savings amount. We say: ‘Here is where you stand on your current rate with a retirement age of 65. This is what you’re on track for.’ That really resonates,” says Ready. “That’s a form of a written plan. It’s more about every time we interact, [telling them] where they are on their journey and, most importantly, what the next best step is to improve the outcome — maybe invest in that, or add another 1% contribution.”

Also see: 4 reasons to be thankful for 401(k) plans

Personalizing the enrollment experience really improves the chances employees will use retirement tools, Crain says. “For example, you could say: ‘Knowing your income, if you enroll at 3%, this [is what] will happen,’” he says. “We find much higher rates of utilization [with that approach] rather than just a generic enrollment site.”

“We do have some companies that just don’t want to auto enroll, so they just don’t,” he says, “but they know they have participation issues.”

Link to health care

A second, highly impactful way some companies have been getting employees signed up for 401(k) plans is tying enrollment in with annual health care enrollment, Crain notes.

“No one blows that off. No matter how you get them to do it, they’re going to [enroll in health care],” he says. So broaden health care enrollment, he advises. Make it a time for both physical and financial wellness.

Employers can double or triple their plan participation rates by using this approach, Crain says.

“Employees are making a big decision and, again, we’re making it easy for the employee at that point to enroll,” he says.

A recent Wells Fargo analysis pointed to some disheartening figures for middle class savings. “Saving for retirement is a formidable challenge for middleclass Americans with 34% not contributing anything to a 401(k), an IRA or other retirement savings vehicle,” according to the fifth annual Wells Fargo Middle Class Retirement study. 

“When you see one-third of the middle class isn’t saving in a traditional vehicle, it’s concerning,” says Ready. “One-fifth have saved $0, literally nothing.”

Also see: 5 low-cost ways to make your 401(k) plan better

Ready says it’s easy for employees to get stuck in a “I’ll save later to make up what I didn’t save today” mindset.

“Saving for retirement isn’t easy,” he says. “It requires sacrifice and it’s not something people can push off and hope to achieve later in life. If people in their 20s, 30s or 40s aren’t saving today, they are losing the benefit of time compounding the value of their money. That growth can’t be made up later, so people have to commit early in life to make savings a regular discipline year after year — it is the only way most people will achieve their financial goals to carry them through retirement.”

Generational differences

Still, there is a silver lining, Bank of America’s Crain says. “Some interesting observations we’re seeing — millennials are better savers,” he says, thanks in part to the automatic enrollment and escalation features provided by their employers. Millennials are doing a “decent” job at saving money in retirement plans and sticking with it, says Crain.

However, they still need help with investing, he says. “They’re still not trusting, given the decade or so that they’ve had with rough financial markets and financial institutions.” Employers of millennials can use target-date funds and managed account advice programs to help smooth that hurdle, he says.

LSG Sky Chefs uses an investment advisory service and Swenson says the program is popular.

“The feedback I’ve heard, when we explain it or after they’ve gone to the site is: ‘It’s so easy and personalized.’ It’s tailored specifically to them with their individual information and their goals,” Swenson says. “They feel more confident in planning for their own retirement. They feel they’re on more solid ground.”

Also see: Employers see role for more tech in retirement plan communications

“With intuitive plan design strategies, companies are making access to financial benefit plans and decision-making about enrollment and contribution rates easier, and helping employees achieve better outcomes through personalized education and advice,” says Steve Ulian, head of institutional business development for Bank of America Merrill Lynch. “By further integrating how employees save for retirement and long-term health care costs, employers can help people see a more complete picture of their financial wellness.”

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