Defined contribution plan clients of T. Rowe Price Group continue to expand their auto-enrollment deferral rates beyond the traditional 3%, the company reported Tuesday.
Among plans offering automatic enrollment, 30.2% had an initial deferral rate of 6% or more last year, continuing an upward trend from the 16.9% in 2011, said a T. Rowe Price report. By contrast, the 3% deferral was offered by 38.2% of plans last year, representing a steady decline from the 49.7% in 2011.
“This is great to see,” Judith Ward, a senior financial planner for T. Rowe Price, said in an interview. “We have tried to educate sponsors, showing them examples of what happens with 3% compared to 6%.”
Ms. Ward added that T. Rowe Price's education campaign has incorporated comments from plans that adopted the 6% rate. “We worked with the pioneers, who were able to tell their stories to other plans.”
The report noted a continuing dramatic difference between participation rates among plans with auto enrollment and those in plans without. Last year, it was 88% for plans with auto enrollment and 48% for plans without. There were similar gaps in 2014 and 2013, and Ms. Ward said the information was presented to illustrate the contrast between the two types of plan design.
“Age groups in their prime working years — ages 30 to 60 — who are in auto-enrolled plans are showing a greater than 30-percentage-point increase in their participation rate compared with the same age groups in the non-auto-enrolled plans,” the report said.
The report used record-keeping data from 662 client plans covering more than 1.6 million participants. The plans all have DC assets of at least $50 million.