Defined contribution plan participation rates increase up to 70% when plans use key design features — auto enrollment, automatic increases, online deferral changes or employer contribution — according to research from Principal Financial Group.
The average total participant savings rate is 11% with retirement plans that have at least two of the key features, more than double the average savings rate. Principal analyzed more than 25,000 DC retirement plans.
To make the largest impact on savings, Principal recommends automatic enrollment for all employees at a 6% deferral rate, automatic annual increases of at least one percentage point annually, online deferral changes made available to participants and an employer contribution or match.
“This report may be a wake-up call for some employers when they see how many of their employees are not adequately financially prepared for their retirement,” said Jerry Patterson, senior vice president of retirement income strategy, in a news release.