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CCH® PENSION — 03/21/12

Aon Hewitt survey finds employers doubtful about employees' ability to save for retirement

A recent survey by Aon Hewitt finds that employers have become increasingly skeptical about their employees' ability to successfully save for retirement. In response, employers are embracing innovative solutions to help rethink their retirement benefits plan strategies and assist their employees in better preparing for retirement. More than 500 large U.S. employers, representing over 12 million employees, were surveyed.

CCH Pointer: The Aon Hewitt survey of employers contrasts with a recent survey of employees by Towers Watson. The Towers Watson survey found that U.S. employees' confidence in their ability to retire comfortably has rebounded from post-recession lows.

According to the survey, only 4% of employers are very confident that their workers will retire with adequate retirement assets, down substantially from 30% in 2011. Additionally, only 10% of plan sponsors feel very confident that their employees are taking accountability for their own retirement and just 18% are confident that workers will be able to manage their income during retirement.

The survey found that more than half (52%) of employers will focus on encouraging workers to take greater accountability for their retirement savings in the year ahead. In addition, nearly half (44%) of employers will focus on helping workers retire with enough money and most (60%) say that they will place a greater emphasis on helping employees understand and use the employer-provided resources available to them.

Auto enrollment continues to grow

Automatic enrollment has been one of the biggest retirement trends in recent years, and will continue to be in the year ahead, the survey found. Currently, 55% of plan sponsors automatically enroll workers in their employer-provided defined contribution plan, up from 24% in 2006. More than a third (34%) of plans are likely to add this feature for new hires in 2012.

Aon Hewitt found that of workers who are subject to automatic enrollment, most (63%) aren't saving enough to get the full employer match. In response, nearly one quarter (24%) of employers plan to make changes to their automatic feature in 2012. Of those making changes, 26% will apply automatic enrollment to existing non-participants, 26% will add an automatic contribution escalation feature, and 24% will increase the initial default rate.

"Automatic enrollment alone isn't enough to get workers where they need to be," said Pamela Hess, director of retirement research at Aon Hewitt. "Plan sponsors need to step it up by encouraging employees to save at a higher rate. Adding features such as contribution escalation to get workers saving at least at the employer match level --or ideally even more --is key to helping them meet their savings goals."

Advisory solutions and features

To further help workers meet their retirement savings goals, while also helping them to become more accountable, plan sponsors are increasingly adding investment advisory solutions and features, the survey found.

Currently, over three-fourths (79%) of employers offer target-date portfolios. More than half (59%) offer online investment guidance, while nearly four in ten now offer online investment advice or managed accounts (39% and 38%, respectively). For those plans that do not already offer it, 26% plan to offer online advice and 24% will likely add managed accounts in the year ahead.

Source: Aon Hewitt news release, January 25, 2012.

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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