New data from Aon Hewitt show 57% of 401(k) plan sponsors offered automatic enrollment in 2010, compared to 24% in 2006. Thirty-six percent of plan sponsors who don't offer the feature said they are likely to add it in 2011.
"Auto-enrollment is a relatively simple and effective way for companies to help workers plan for retirement - especially younger workers who may not feel the immediate pressure to save for retirement," says Pamela Hess, director of retirement research at Aon Hewitt.
The research involved data from 210 mid-sized to large U.S. employers representing 6.2 million workers. In analyzing the information, Aon Hewitt consultants found that automatic escalation of 401(k) contributions is offered by 47% of plans, up from 17% in 2006, while auto-rebalancing is offered by 49% of plans, up from 27% in 2006.
In addition, about 26% of employers are likely to add auto-escalation in 2011, and a third are considering adding auto-rebalancing, according to the survey.
Employers, however, have lost some faith in their employees' ability to save adequately for retirement. For example, 38% of employers are confident that workers are taking accountability for their financial future, down from 43% in 2010.
Still, 30% of companies are confident employees are sufficiently prepared for retirement, showing no improvement from 2010, the consulting firm reports.
The research also reveals that employees are lacking diversified portfolios, taking inappropriate investment risk and not rebalancing their portfolio. As a result, more employers are providing tools and services to help workers make better decisions.
For example, 56% of plan sponsors offer online investment guidance, and 36% provide online investment advice and managed accounts, according to the survey. In 2010, 83% of plans offered target-date funds.
"Amid the recent market volatility, there has been a dramatic difference in outcomes among people who sought out investment assistance versus those who have not," Hess explains. "Employers are seeing the disparity and realize they need to step up their efforts to ensure workers are saving adequately for retirement and have an investment strategy."
She adds: "At the same time, companies acknowledge the diverse needs of the workforce and understand that they need to offer a variety of investment advisory tools to meet the various needs and savings habits of their employees."
Other key findings of the survey include:
* Most companies (85%) plan to review their defined contribution fund operations in 2011, including fund expenses and revenue-sharing.
* Nearly half (48%) indicate they will review the total plan cost more frequently and/or thoroughly during the year. Additionally, 69% of companies indicate they will increase the amount of employee communication surrounding investments and plan fees.
* More than a third of employers (34%) offer a Roth 401(k), up from 29% in 2010. Of those not currently offering this option, 38% indicate they will add the capability in 2011.
* Nearly a quarter (23%) of employers suspended or reduced company matching contributions in the past two years. Of those, more than half (55%) have already reinstated it in some form, and 18% plan to reinstate or increase it in 2011. Another 11% plan to do so in 2012 or later.
* The majority of pension plan sponsors (75%) plan to make no changes to plan design in 2011. However, more employers are likely to close or freeze their defined benefit plans in the coming year.
* Among the plans that have ongoing accruals for some or all employees, 16% say they're very likely to freeze accruals during 2011, compared to just 9% in 2010. Among plans that are open to new hires, 13% are very likely to close participation to new employees, up four percentage points from 2010.
* Retiree medical benefits will continue to decline. Seven in 10 employers provide some type of post-retirement medical coverage to their current or future retirees. Nearly two-thirds (65%) currently offer prescription drug coverage to post-65 retireees and file for the Medicare Part D Retiree Drug Subsidy. However, only 53% of companies plan to keep the same strategy in 2013 when the reform law eliminates the tax-free nature of the Medicare Part D subsidy.
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