Defined retirement savings plans such as 401(k)s remain the most popular
By Gina Gallucci-White
BridgeTower Media Newswires
NEW ORLEANS - Like fax machines, telephone booths, cassette tapes and typewriters, company-provided employee pension programs have all but been eliminated. Companies are encouraging employees to look at retirement saving programs in different ways.
"Employer-sponsored retirement plans are the main conduit for employees to save for a financially sustainable retirement," said Chatrane Birbal, director of congressional affairs for health and employee benefits policy for the Society for Human Resource Management.
As one of the world's largest human resource societies, with 300,000 members in 165 countries, SHRM's 2018 benefits research report noted 95 percent of organizations offer one or more retirement plans to their employees. Traditional 401(k)s or similar defined retirement savings plans are the most popular at 93 percent, which is an increase from last year's 90 percent.
"Even though company-provided pension programs are being phased out, according to our survey respondents, one-fifth or 20 percent of organizations still offer a traditional defined benefit plan that is open to all employees now," Birbal said. These numbers are a decline from 2017's 24 percent.
Many employers are also encouraging workers to save for retirement by offering educational resources to assist with financial planning. SHRM is finding more organizations are offering financial advice in an online portal or bringing in a retirement financial expert for group classroom sessions than they did five years ago.
"In addition to the value of learning how to effectively manage one's finances, employees can take advantage of those trainings at work instead of carving out time during nonwork hours," Birbal said.
Many employers are also offering or matching traditional 401(k) employee contributions as an incentive to save. Earlier this year, Abbott Laboratories unveiled the program Freedom to Save, which helps employees save for retirement while also paying off student debt. Available to part- and full-time employees who are contributing 2 percent of their eligible pay to student loans through a payroll deduction, the company will match the amount and deposit it into employees' 401(k) account without requiring them to make their own contribution.
"The average American spends the majority of their time at work, and so employers know they can play an important role in the financial literacy and savings behavior of their employees," Birbal said. "In addition, employers who want to remain competitive, especially now that we have the lowest unemployment rate in the last 17 years, offering a retirement benefit option is a way to make you, the employer, an employer of choice. It lets you be more competitive to attract new talent, and so it is a win-win for both the employer and employee."
Scott Skidmore, director of advisory services for Kelly Advisory, has seen a move in plans to include Target Date Funds, which are "set up as a set-it-and-forget-it fund that get more conservative as you get older, so employees don't need to think about the right asset allocation for themselves."
Another way employers are encouraging retirement planning participation is by auto-enrolling employees into plans.
"Everybody gets a chance to opt out," Skidmore said. "They can say, 'I don't want to do this' ahead of time, and they can always change how much a company enrolls them at - typically it is 6 percent, and there is another tool called auto escalation and their enrollment is escalated by 1 percent a year up to usually about 10 percent."
Because some employees are fearful of the stock market because of the 2008 recession, Skidmore said some employers will take one day and sweep all employees back into target-date funds.
"If someone is invested in a fixed account or some sort of cash amount because they think that is safest, the employer, knowing that what they are investing in has a big impact ... they will do a sweep and re-enroll everybody in the plan back into target dates," Skidmore said. "That is just for one day, but most employees will leave it there. Some employees will move it out ahead of time. It's not really employers controlling it, but it is encouraging them to invest in the right investment options."
While many want to discuss how great the funds are in company plans, Skidmore notes they only have a small impact on an employee's retirement saving success rate. The two biggest factors are how much employees contribute and asset allocation.
"If you are too conservative too young, it impacts your retirement, and if you take too much risk when you need the money, it impacts your retirement," he said. "Target Date Funds take care of that asset allocation worry."
Published: Mon, Oct 15, 2018
