Automatic features offered in defined contribution plans are better preparing employees for retirement, according to a joint study by Lincoln Financial Group and Retirement Made Simpler.
The study surveyed 201 plan executives that offer at least one of three features — automatic enrollment, automatic escalation and qualified default investment alternatives. Eight-five percent of respondents said automatic features are “especially effective” in helping participants who are less educated on retirement matters.
Plans with automatic escalation see deferral rates of 8% or higher compared with the average rate of 4%, according to data in the report from the Plan Sponsor Council of America, which also reported that less than half of plan executives have adopted auto enrollment or escalation.
Of respondents that have adopted all three features, 97% say the “advantages outweigh any perceived disadvantages.”
However, changes in plan design have progressed at a more rapid pace than the communication aspect. Fifty-one percent said they offer customized communication and only 50% have revamped communication materials following the introduction of auto features.
“Employers who offer these features in their plans will help Americans take charge of their retirement. But just like any other plan design innovation, auto solutions do not mean you can simply set it and forget it,” said Chuck Cornelio, president, retirement plan services at Lincoln, in a news release. “Employees need personalized and outcomes-based communication and education to meet their goals and boost their retirement readiness.”