US - An increasing number of employers are offering tools to employees that put their 401(k) pension plans on ‘autopilot' in a bid to encourage higher savings, according to new research from Hewitt Associates.
Hewitt’s biennial survey Trends and Experience in 401(k) Plans revealed nearly two-thirds (64%) of employers offered 401(k) plans as their primary retirement savings vehicle, up from 55% in 2003.
One in five (19%) automatically enrolled employees in the plans, compared with 14% in 2003, and more than a quarter (26%) provided automatic rebalancing, up from 11%.
Hewitt said the number of companies offering or planning to offer contribution escalation features - which enable workers to automatically increase their 401(k) contributions over time - rose dramatically to almost 20%, up from just 3% in 2003.
In addition, some 63% offered pre-mixed/lifestyle funds, up from 55% two years ago.
“A number of employers are taking more aggressive steps to address [low participation] by automating features of the 401(k) plan - essentially taking the ‘legwork’ out of retirement saving and investing by enabling employees to maximise the value of their 401(k) plans without having to spend a lot of time thinking about or proactively managing them,” said Lori Lucas, director of participant research at Hewitt.
The survey found no increase in the average number of investment options offered in 401(k) plans but a decrease in prominence of employer stock as an investment type.
“Instead of providing more 401(k) investment options, employers are trying to give workers vehicles - such as lifestyle funds - that make diversification easier, and access to tools that help them more easily choose among the existing investment options,” Lucas said.
Hewitt’s survey covered more than 450 companies in the US.
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