As defined contribution plan industry members look ahead to 2019, they forecast enhanced versions of existing practices will be at the top of to-do lists for plan sponsors, providers and consultants.
A prime example is automatic enrollment, where the sponsors' goal has gone beyond encouraging participants to simply contribute. The goal now — and in the future — is to encourage participants to contribute more for initial deferrals and to contribute more overall via auto enrollment and auto escalation.
Among record-keeping clients of T. Rowe Price Group Inc., for example, the most common initial deferral rate is now 6% of annual pay rather than the so-called traditional 3%, said Aimee DeCamillo, head of retirement plan services for Baltimore-based T. Rowe Price. The firm saw improvement in deferral rates in 2018 and "we'll see it next year," she said.
The latest data show 32.4% of clients using the 6% deferral rate vs. 31.9% setting the 3% rate. Another 14.7% have a 4% rate, while 13% have a 5% rate. A handful of clients (1.1%) have rates higher than 6%, while the rest (6.9%) have rates below 3%.
Ms. DeCamillo and other sources were asked what the industry can do without the assistance or interference of Congress, state legislatures, regulators or litigators.
"Auto everything will continue," said Sue Walton, Chicago-based senior defined contribution strategist for Capital Group Cos. "Six percent will be the new starting point" for auto-enrollment annual salary deferrals.
She also forecast that more companies will use auto escalation to encourage participants to eventually put as much as 15% of annual pay into their retirement accounts. "Companies see that auto features better drive results," she said.
Ms. Walton said getting participants to save more is only part of the goal. "The measure of success has changed," she said. "You not only need participation, you need participation at the right levels." This means making sure participants are investing appropriately, according to their needs and circumstances, as well as planning how to effectively spend in retirement so they don't outlive their assets.