Despite the popularity of automatic plan features, many plan sponsors still seem reluctant to incorporate them into plan designs, according to a survey released Wednesday by J.P. Morgan Asset Management.
Nearly 60% believe participants should make their own decisions about how to use the plans, including whether to participate, how to contribute and how to invest, the survey found. Plan sponsors in the so-called "hands-off" camp edged out those in the "proactive" group, albeit by a slight margin. Forty-one percent viewed themselves as having a proactive philosophy, meaning they believed in positioning participants for greater retirement success through auto-enrollment, auto-escalation, personalized communications and helping with investment decisions.
Proactive plan sponsors, however, outmatched their hands-off peers in expressing confidence in achieving plan goals. For example,71% of proactive-philosophy plan sponsors believed their plans are extremely effective or very effective in helping to ensure participants achieve a financially secure retirement. Only 47% of the hands-off plan sponsors believed the same.
"Our survey suggests that some DC plan sponsors have misconceptions about the concerns of their participants and are failing to take a proactive approach to plan design, with success suffering as a result," Meghan Jacobson, executive director at J.P. Morgan Asset Management, said in a news release. "It has been demonstrated that features such as automatic enrollment and automatic contribution escalation can have a significant positive impact on participation rates and savings levels."
Overall, 55% of plan sponsors offered automatic enrollment, up from 43% in 2013. Even fewer plan sponsors — 38% — offered auto contribution escalation, up from 21% in 2013.
Plan sponsors that chose not to offer automatic features cited similar reasons, the top being their belief that employees are responsible for saving on their own. Some feared too much employee pushback, while others felt that one contribution rate wasn't right for everyone. Still others were concerned about too much fiduciary risk.
J.P. Morgan's study surveyed 838 plan sponsors in the first quarter.