US - Employer-sponsored pension plans, 401(k) plans or other employee savings plans tend to be be more generous, use more channels for employee communication, and are more attentive to plan management activities than employers that sponsor just a savings plan.
These findings are from a survey of 252 defined-contribution (DC) plan sponsors by William M Mercer. Fewer than 58% of the respondents also sponsor a defined benefit pension plan that covers most of their employees. With this proportion steadily declining in recent years, Mercer found that employees are becoming increasingly reliant on savings plans as vehicles for retirement income or wealth accumulation.
Almost across the board, the survey found that DC plan design features are more generous when the employer also offers a defined benefit (DB) plan. Eligibility is more liberal, vesting occurs faster, and employer contributions are more likely to have both a fixed and a discretionary component. For example, 45% of DB/DC plan sponsors have immediate vesting on the employer match, compared to 27% of DC-only sponsors.
DB/DC plan sponsors are more than twice as likely as DC-only sponsors to automatically invest company matching contributions in employer stock (26% versus 11%, respectively).
On average, companies with both types of plans use more communication channels to provide information about the savings plan. They also are far more likely to: offer individual counselling for terminating employees (58% versus 39%); to target specific messages to participants who do not diversify (34% versus 18%); those who are nearing retirement (32% versus 22%); and to measure the effectiveness of their communication materials (57% versus 43%).
By Janet Du Chenne
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