Management goals of 401(k) plan sponsors are not in sync with their employees investment behavior, according to a new study by Hewitt Associates.
While employers are correctly identifying participation and diversification as areas of concern, they have not succeeded at improving contribution rates and increasing the use of various investment options, the report noted. For example, 24% of sponsors surveyed classify "not contributing enough as the second most common employee investment mistake. However, lower paid and younger employees are not getting the message and are contributing just up to the typical employer match threshold of 6% of pay. Moreover, although 57% plan sponsors identified inadequate diversification as the third most common mistake made by participants, 46% of 401(k) participants are invested in only one or two funds, the study revealed.