What does this have to do with 401(k) plans? More than you might think. For the longest time, the most popular employer match was 50 cents on the dollar up to the first 6% of employee deferrals. Now, according to Aon Hewitt's "2013 Trends & Experience in Defined Contribution Plans: An Evolving Retirement Landscape," the most popular match is a full dollar on the dollar. According to Aon Hewitt, three-fourths of employees save at or above the company match level, so if that holds, savings would rise substantially.
Other noteworthy trends reported by Aon Hewitt include:
- 76% of plans allow immediate pre-tax contributions upon hire, versus 45% in 2001.
- While 59% of plans have automatic enrollment, more than half have set the default savings rate below the employer match level. While this tends to increase participation, it also will tend to lower savings levels.
- Employers offering managed accounts ballooned from 29% in 2011 to 52% in 2013.
- Target-date funds are now the norm, with 86% of plans offering them.
- Employers permitting Roth contributions jumped from 11% to 50% in 6 years.
For the most part, it appears that employees appreciate the help they get through automated programs and other tools designed to make their decision-making easier. . Few ever decide to opt out. The higher employer match should greatly benefit those who stay with their plan and contribute at the higher employer match level. For those who contribute at lower levels, it would be helpful to determine the obstacles - for example, are other financial challenges standing in the way? If so, is there a way to get these participants to both save more and more effectively address the other financial factors?