Defined contribution plan executives are increasing 401(k) plan corporate matches in an effort to encourage greater participation, said a survey by Aon Hewitt.
The survey found that 42% of companies match a dollar for each dollar of participant contributions up to a certain annual salary percentage limit — a significant jump from 31% in 2013 and 25% in 2011, said a report on the survey issued Tuesday. The survey is conducted every other year.
“It's becoming very popular,” Robert Austin, director of retirement research, said in an interview about the dollar-for-dollar match. “Companies are benchmarking themselves against other companies.”
Before 2013, Mr. Austin said the most common type of corporate match was 50 cents for each dollar of a participant's contribution up to a certain annual salary percentage limit.
In addition to companies trying to match their peers, Mr. Austin said the higher corporate matches also might reflect a retreat by companies from profit-sharing contributions or automatic company contributions to 401(k) plans regardless of how much a participant invests.
To illustrate the changing match strategy, Mr. Austin said 19% of plans offered a dollar-for-dollar match up to 6% of a participant's salary in the 2015 survey vs. 10% of plans in the 2011 survey.
These findings demonstrate that companies are “willing to put more skin in the game” to encourage greater retirement savings by participants, Mr. Austin said.
Although Aon Hewitt found the percentage of plans offering auto enrollment has remained essentially consistent over the past four surveys — 58% in 2015 — the initial deferral rates are rising. For the latest survey, 52% of plans with auto enrollment set an initial savings rate of 4% or more of salary vs. 39% in 2013.
“A lot more plans are putting people in at pretty robust levels and moving them up through auto escalation,” Mr. Austin said. The latest survey found 64% of plans set an auto-features ceiling at a total of 10% or more of annual salary for auto enrollment plus auto escalation, compared to 50% of plans in 2013.
The Aon Hewitt survey also found a dramatic shift away from revenue sharing. In 2011, for example, 83% of plans employed a revenue-sharing model for assessing fees. By 2013, it was down to 52%, and in 2015 it dropped to 40%. Meanwhile, fixed-dollar per-head fees have become more popular, rising to 39% of plans in 2015 vs. 26% in 2013 and 14% in 2011.
“Plans are doing this on their own” without being prodded by legislation or regulation, Mr. Austin said of the shift to fixed-dollar fees. “They say this seems a little more equitable.”
The latest survey contained responses from executives at 367 plans with more than $750 billion in aggregate assets and more than 10 million participants.