Vanguard for over a decade has been providing valuable data on retirement plan participant trends, based on its own client base. The latest edition, How America Saves 2014: A Report on Vanguard 2013 Defined Contribution Plan Data, for the most part shows steady progress. A few of the highlights:
What we see from the Vanguard data is a growing, strong preference by many participants for assistance in getting them to a better place in saving for retirement. Most participants recognize that they are not financial experts. The professionally managed and auto-enrollment data would appear to reconfirm that as well.
8/29/2013 0 Comments
Recent legislation and a flurry of merger & acquisition (M&A) activity have led to dynamic changes in the healthcare industry. The Affordable Care Act (ACA) is resulting in many healthcare employers reexamining their organizational structures and operations. The related pharmaceutical industry similarly has seen significant M&A momentum. Fidelity has released a report, Defining Excellence: Plan Design and Retirement Readiness in the Not-For-Profit Healthcare Industry, that focuses on the challenges faced by these plan sponsors. Data was gathered from 600+ plans serviced by Fidelity, representing about 2 million participants and $72 billion in plan assets. One particularly interesting trend reported by Fidelity is that as employee tenure increases, the gap in participation levels tends to narrow between those in plans with automatic enrollment (AE) and those in plans without AE. While this result is somewhat to be expected as few tend to opt out of participating in their employer's plan, what is notable is that the gap never fully closes, even for employees with 25+ years with their employer. In AE plans, the participation rate hovers within four percentage points on either side of 80%, regardless of tenure. By contrast, in non-AE plans, the participation rate for employees with one to three years of tenure is only 35%. This does improve to 70% for those with 25+ years, but still falls short of the 84% for those in AE plans with a similar tenure.
Surfing Boomers. Another interesting finding in the Fidelity study is that across all age groups except those 70+, participants preferred engaging with their plan through Fidelity's participant website than via phone. The level is very consistent for those in their 30's through those in their 60's, with a slight uptick as one approaches age 65. WIth the continued growth of the smartphone and tablet markets, it would appear that access through a portal will remain strong for the foreseeable future.
Cherry Blossoms in Washington, DC
1979 was a pretty good year if you were a Pittsburgh sports fan. The Steelers won the Super Bowl in January and the Pirates won the World Series in October. Willie Stargell was the MVP of the World Series, with the song "We Are Family" playing everywhere. 1979 also is a good starting point for looking at how the retirement space has changed over time. If you worked in the private sector that year, chances are more likely than not that you had a defined benefit (DB) plan rather than a defined contribution (DC) plan.
The Employee Benefit Research Institute (EBRI) has published data outlining just how much pension coverage has become DC-centric over 3+ decades. Interestingly, in both 1979 and 2011, an estimated 45% of all private-sector workers were covered by either a DB or DC plan. Over the years, the figure has remained relatively steady in the 45%-50% range. What is different is that of those who are covered by a retirement plan, there has been an almost complete transformation from DB to DC. For those participating in a retirement plan in 1979, 62% were in a DB plan, 16% in a DC plan, and 22% in both. By contrast, in 2011, 7% were in a DB plan, 69% in a DC plan, and 24% in both.
These days, many DC plans have added automated features to help participants save better. Some have suggested that this makes the DC plans more DB-like. With the well-documented struggles of participants to save, it will be interesting in the future to see if there is a move toward the center in terms of DB and DC coverage.
Blog Author - Ken Felsher
With over 25 years of writing, editing, and research experience. I enjoy sharing with my readers my love of working with content on a variety of subjects.
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