The ninth annual Plan Sponsor Attitudes Study reveals plan sponsors’ top concerns, as well as information on plan changes and participation rates. Fidelity surveyed 1124 sponsors whose plans had at least 25 participants and $10 million in assets, and start-upsto plans with more than a quarter million in assets. Plan sponsors surveyed used an assortment of record-keepers.
The study focused on sponsors that use a plan consultant or financial advisor. It found that a historically high proportion of sponsors, 92%, say they work with an advisor. And while 44% of plan sponsors indicate that they’ve retained their current advisor for four years or less, 22% were looking to make a switch. This was down from 38% reported in 2017.
In line with previous years’ results, the report indicates a high level of plan sponsor activity, with more than eight in ten sponsors reporting changes to their plans within the last year. More than 80% of sponsors indicate changes to the plan design, most of which were intended to increase employee participation (54%), with 51% intended to increase savings rates. More than one-third of plans increased the number of investment menu options.
Additionally, auto-enrollment was demonstrated to be a robust way to increase participation rates. Participation among 20- to 29-year-old employees with auto enrollment was 84%, in contrast with 31% for those without auto-enrollment. Employer policies like auto-enrollment that lead to increased participation rates can help promote retirement readiness among their workforce.
Here are the top three concerns reported by the plan sponsors surveyed:
1. Are employees being effectively prepared for retirement by the plan? Retirement readiness emerged as a top concern for plan sponsors assessed in the study. This represents a change from previous years, where cost reduction occupied the top spot.
2. Is the plan helping the organization retain top talent? The ability of the 401(k) plan to attract and retain the best workers continues to be an important consideration for plan sponsors in this year’s study. It’s also among the top three reasons sponsors cited for hiring an advisor.
3. Are plan-related employer costs being reduced? Cost reduction continues to be a significant consideration, but with 32% of plan sponsors reporting cost as a top concern, it was knocked out of the top spot it occupied in last year’s survey.
The findings on plan sponsor attitudes and plan changes designed to increase employee participation and savings rates reflects an increased focus by organizations on employee retirement readiness. Last year, 37% of plan sponsors indicated the top reason to hire an advisor was to obtain fiduciary support. This year, only 14% of respondents indicate fiduciary help as a top consideration, with their focus turning instead toward employee concerns.