5 retirement plan trends for 2015: How many are you on board with?
As you may have heard, there’s a retirement savings problem in America. Workers need help saving for their golden years, and they’re looking to their employers for help. Is your plan keeping up with the times?
To help you benchmark your plan, here are five trends Robert C. Lawton, founder and president of Lawton Retirement Plan Consultants says he’s seeing take shape:
1. Recalibrating the match to spark more savings
The employer match was originally created to encourage employees to participate in company-sponsored retirement plans. Now employers are trying to stretch their matching contributions in an attempt to get employees to save more.
Example: Lawton says a lot of firms are moving away from more traditional match formulas — like matching 50% of employees’ contributions up to 6% of pay — to dropping the match percentage and offering it up to a higher percentage of pay — à la matching 25% of employees’ contributions up to 12% of their pay.
Either way, the maximum employers will have to shell out ends up being the same. But it increases the likelihood employees will bump up their contribution rates.
2. Adopting an auto re-enrollment strategy
Automatic re-enrollment is the act of automatically shifting plan participants’ plan dollars out of their current investments and into the plan’s default option, unless participants opt out of the process.
Lawton says this approach is more frequently being paired with the more traditional auto enrollment and auto escalation strategies.
A popular re-enrollment investment option plan sponsors are choosing: target-date funds.
Lawton says to expect re-enrollment to become commonplace in the near future.
3. Educating employees online
Having to pull employees away from their desks to educate them about their company’s 401(k) plan is cumbersome — not to mention costly, at least from a productivity standpoint.
As a result, more employers are switching to an online education system in which employees can access educational info — like short tutorial videos — from home.
The benefits to this type of online education are two-fold:
- Employees aren’t pulled away from their jobs.
- Spouses can take part as well.
4. Adding Roth options
The government’s move to make it easier to convert traditional 401(k) dollars into Roth 401(k) dollars has resulted in more employers offer Roth options.
In fact, Lawton cites a 2014 Towers Watson survey that showed 54% of plan sponsors now offer Roths to participants.
5. Dumping plan fees onto participants
The same Towers Watson survey revealed that 58% of plan sponsors now require employees to pay direct recordkeeping fees.
That figure has been steadily climbing over the past few years from 33% in 2009 to 44% in 2012 to today’s high of 58%. Lawton says it’s a trend he expects to continue.
