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4 retirement plan design trends to watch in 2015

A company’s 401(k) plan is a great benefit to employees and plan sponsors remain focused on helping workers make the most of them. As an employer, it’s your job to attract employees to the plan, and fostering success is the best way to do so.

Plan design plays a significant role in employee success, and there are opportunities for design to be catered to better suit employee needs and retirement objectives. Ascensus recently analyzed data from its 43,000 retirement plans and identified four notable plan design trends and their impact on retirement readiness. For optimal results and experience for employees, consider adding the following options to your plan:

1. Automatic enrollment. Automatic enrollment puts the power in your hands to make sure your employees are actively saving for retirement, creating an environment conducive to savings by forcing employees to opt-out of the plan. Recent data from Ascensus found that plans with automatic enrollment averaged 21% higher participation than those without it.

2. Automatic increase. Further automate retirement savings in your plan by using automatic increase features, which boost employees’ savings rates in pre-determined intervals until they reach certain levels. This strategy helps employees incrementally increase the amount they are saving for retirement without drastically impacting their paychecks. According to Ascensus data, employees on track to reach their retirement goals were saving at a 14% deferral rate, which is typically not achieved overnight.

See also: 7 misconceptions employers have about retirement auto features

3. Create guided investment solutions. Employees are increasingly opting for a hands-off approach to their investments. Working with a financial professional allows you to build a model portfolio that accounts for employee risk tolerance and retirement time horizon. Fifty percent of employees invest in model portfolios when offered as part of a plan. Target-date funds in particular capture 18% of assets when offered in Ascensus plans, especially among employees between the ages of 18 and 24 where close to 40% are investing in a target-date fund.

4. Offer a match. A matching program is another great way to attract employees to the plan while incentivizing them to save more. For plans that offer a match, the average participation rate is 7% higher than for plans that do not offer a match to employees. Matching programs are a great way to encourage employee saving and help them in the process; Ascensus has found that offering a match of 50 cents for each dollar up to 8% of pay is a great way to encourage employees to save more. If you do offer a match and automatic enrollment, make sure that the minimum deferral rate is at least equal to the rate which will maximize the match your employees receive.

See also: Employer 401(k) matching gets passing grade

Geno Cufone is senior vice president, retirement administration, at Ascensus, a retirement and college savings services provider. Ascensus is headquartered in Dresher, PA.

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Financial planning Retirement benefits
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