Plan sponsors, or employers who offer a retirement plan for employees such as a 401(k), have shifted their focus from reducing plan costs to helping employees adequately prepare for retirement.
As the number of plan sponsors working with a financial advisor reached an all-time high of 92 percent, employers have reconsidered their top priorities when it comes to their plans, according to Fidelity Investments Annual Plan Sponsor Attitudes Study. The latest study showed plan sponsors’ primary concern was whether their plan was effectively preparing employees for retirement financially (33 percent), a change over 2017 when the main focus was on reducing business costs related to the plan (32 percent). The next top concern among employers polled was whether the plan was effectively helping to retain top workers.
Plan sponsors actively looking to switch advisors is also down from 38 percent in 2017 to 22 percent in 2018, according to the study, but companies remain active when it comes to changes made to their plans. The majority of companies reported making changes to their plan design (82 percent) and the investment menu available to participants (83 percent).
Among the firms that made changes to the investment menu of their plan, 37 percent said they increased the investment options available.
Not surprisingly, changes that plan sponsors made to their plan design aimed to increase employee participation (54 percent) and increase employees’ saving rates (51 percent). According to the study, plan sponsors tend to believe that automatically enrolling employees in a retirement plan will discourage them from participating, but the opposite is true. Participation rates for 20 to 29 year olds in an auto-enrollment plan is 84 percent versus 31 percent in non-auto-enrollment plans.
Most employees (68 precent) reported being very satisfied that they were automatically enrolled in their plan. Investors want to take advantage of retirement plans but it seems they want the enrollment and management to be as simple as possible.
Even robo-advisor Betterment has sought to grow its business by making retirement accounts as easy as possible for investors. Wealth managers who use Betterment for Advisors were recently given the ability to initiate and execute a retirement account rollover on behalf of their clients. Previously, the paperless rollover feature could only be initiated by the advisor’s client.