Retirement plans are successfully adapting to many of the changing needs of workers and employers, according to a long-running survey of plan sponsors.
Plans are becoming easier to enroll in, more personalized and more flexible when it comes to withdrawals—and these trends have correlated with a rise in participation rates, according to the 2019 Trends & Experience In Defined Contribution Plans survey from Alight Solutions.
More than half of the 240 employers surveyed, 56%, said that at least 90% of their eligible workers participate in a defined contribution plan, up significantly from 2017, when 46% of employers reported a 90% or greater participation rate.
In 2019, plan sponsors reported an average participation rate of 83%—the highest Alight has recorded in nearly three decades of surveying.
According to Alight, by the end of 2018 Americans had more than $7.5 trillion in workplace retirement accounts, and the amount has doubled since the beginning of the millennium. In 2019, more than 85% of employers say that their defined contribution plan is their primary retirement plan, up from 67% in 2009.
The survey found that employers are allowing more workers to participate in plans immediately after being hired. In 2019, 75% of companies reported having immediate eligibility, with another 10% having an age-only requirement keeping their youngest workers from starting to save.
Automatic enrollment in defined contribution plans continues to grow in popularity. In 2019, 74% of the plans surveyed had some form of automatic enrollment, up from 58% in 2015. With this growth, employers are also reporting that fewer workers are opting out of their plans. The proportion of employers reporting an opt-out rate of less than 1% has grown from 16% in 2017 to 21% this year.
Employers also report offering more personalization within plans, with about two-thirds of the survey respondents offering managed accounts within their plans, up from 58% in 2017.
Alight also detected more plan sponsors white labeling the funds within their plans, or changing the name of an investment from its off-the-shelf title to something more intuitive and clear. In 2019, 40% of employers reported white labeling at least some of their funds.
In 2019, very few defined contribution plans require an all-or-nothing withdrawal, a trend that Alight says accompanies a growing desire among plan sponsors to keep assets within the plan. Today, only 8% require a total lump-sum when making a withdrawal, down from 22% in 2014. Now, three-quarters of employers offer installment payments, and 78% permit partial distributions.