Employee participation in defined contribution plans has reached a historic high, primarily due to more plans using automatic enrollment, according to a new report.
In 2012, 78% of employees in the 141 defined contribution plans analyzed by Aon Hewitt participated in their company's defined contribution plan, up from 75% the previous year, according to the report, “2013 Universe Benchmarks: Measuring Employee Savings and Investing Behavior in Defined Contribution Plans.”
“I think that has a lot to do with automation,” said Patti Balthazor Bjork, director of retirement research at Aon Hewitt, in a telephone interview.
For example, in 2012, 59% of DC plans used automatic enrollment, compared with 34% of plans in 2007.
Defined contribution plans using automatic enrollment had an average participation rate of 81.4%, while those plans without automatic enrollment had an average participation rate of 63.5%.
“We looked at loans and withdrawals and cashouts, and leakage out of the plans declined slightly,” Ms. Bjork said.
Of all participants, 26.6% had an outstanding loan, while 6.5% initiated a withdrawal in 2012, according to the report.
However, participants still are not saving sufficiently to support adequate long-term savings goals, according to the report. The average before-tax contribution in 2012 was 7.3%, the same as 2011. Nearly 28% of employees also contributed below the company match threshold.
The average participant balance was $81,240, up considerably from the average balance in 2008 of $57,150.
The 141 DC plans analyzed have total assets of $292 billion.