Improved performance of the U.S. economy during the year past has prompted renewed interest in retirement savings, according to Deloitte’s 13th Annual Defined Contribution Benchmarking Survey.
Based on research conducted last year, the report finds that average account balances reached a record high of more than $95,000 in 2013, up from $85,600 in 2012. And an increased number of employees are participating in defined contribution (DC) plans, jumping 6 percentage points (77 percent in 2013 vs. 71 percent in 2012).
The main reason for lack of employee participation in DC plans last year was “lack of awareness and understanding” (30 percent in 2013 compared to 21 percent in 2012). This contrasts with an “uncertain economy/job market” (14 percent in 2013 compared to 24 percent in 2012).
“Defined contribution plans, both 401(k) and 403(b), now represent the main source of future retirement income for a wide and growing majority of the workforce,” says Stacy Sandler, principal, human capital, Deloitte Consulting LLP. “It is imperative that employers and plan sponsors continue to encourage the growing trend in saving for retirement and focus on developing the right tools to educate and engage the workforce.
“Eighty one percent of respondents identified improving participation education as a top-of-mind issue for a majority of employees,” adds Sandler.
This year’s survey, conducted with the International Foundation of Employee Benefit Plans (IFEBP) and the International Society of Certified Employee Benefit Specialists (ISCEBS), reveals also that transaction processing is supported on mobile devices for just over half (53 percent) of plans. Only one in five plans (20 percent) use the latest communication methods (smartphones and tablets) to educate employees on retirement readiness.
However, employee satisfaction with hand-held connectivity tools continues to climb, jumping to 61 percent from 53 percent in 2012 and 28 percent in 2011, underscoring the point that plan sponsors should continue to evaluate the effectiveness of supplementing traditional communications with going mobile.
Plan sponsors are also aware of this reality and consistently rate the No. 1 barrier to a more effective plan as lack of employee understanding (30 percent), an unchanged finding from year to year.
When looking at the top areas of confusion, the study finds that employees don’t know what funds to invest in (55 percent) followed by not knowing how much to save for retirement (35 percent).
The survey reveals also that companies are showing renewed confidence in the economy and taking steps to make defined contribution plans more accessible and attractive to employees.
For example, immediate eligibility for matching contributions increased to 62 percent in 2013, up 6 percentage points from 2012. And more than 4 in 10 employees (43 percent) cite taking advantage of the company match as the top reason for participation, unseating a personal desire to save for retirement (39 percent).