Nuanced Changes in Retirement Benefits, Study Finds
Employer-provided retirement benefits in general are holding steady, according to the Society of Human Resource Management (SHRM). In “2016 Employee Benefits: Looking Back at 20 Years of Employee Benefits Offerings in the U.S.,” SHRM reports that some aspects of employer-provided retirement benefits have grown in the last one to four years, while others have declined slightly and many have held steady.
To illustrate the overall stability: Retirement savings and planning benefits increased for 22% of the employers served by the nearly 3,500 HR professionals who responded to SHRM’s survey, and decreased for 24% of them. Furthermore:
- the percentage of employers offering retirement preparation-specific planning advice stood at 45% — the same percentage as 20 years ago;
- among the broad categories of employee benefits, retirement and savings benefits remained the third highest employee compensation expense;
- 401(k) or similar defined contribution plans have continued to be the retirement benefit employers offer most frequently, with the percentage offering it holding at 90%; and
- nearly three-quarters provide an employer match of employees’ 401(k) or similar DC plan contribution, as they have since 2014.
Even newer retirement benefit offerings show relative stability. Automatic escalation of salary deferral amounts for DC plans has held at approximately 20% since 2012. And DC plan debit cards have been an offering of 2% of the employers reflected in the survey for every year since 2012 (with the exception of 2015, when 3% made them available).
And second verse, same as the first regarding the popularity of DC plans versus DB plans. For the third consecutive year, the whopping 77-percentage-point disparity it began to report in 2014 between the percentage of employers offering them — 90% and 13%, respectively — held steady.
Those who warn of the perils of depleting retirement savings will be heartened by the SHRM results concerning two retirement plan benefits.
According to the study, 71% of employer-provided plans made it possible for employees to take hardship withdrawals from their DC plans in 2013. That fell to 67% last year, and the slide continues — 60% of employers did so this year. The drop was much more dramatic for plan loans, whose availability fell by one-third, from 66% of employers to 44% of employers, between 2012 and 2016.
The report also says that in the last year, fewer employers allowed catch-up contributions for DC plans and formal phased retirement programs decreased.
Roth 401(k) savings plans have become much more widespread. In 2012, 34% of employers offered them; in 2016, a majority do (51%). And while the report says that formal phased retirement programs decreased in the last year, informal phased retirement programs have proliferated since 2012.
Two aspects of retirement plans that are frequent topics of discussion have arrived on the SHRM survey scene recently in grand fashion.
Employer matches of employee contributions to Roth 401(k)s or similar DC plans are one. They debuted in SHRM’s research in 2014, when 30% reported they offered them. The number of employers doing so continues to increase, amounting to 37% this year.
Much more dramatic is the arrival of a new twist on a plan feature many regard as an important tool in increasing retirement readiness and ameliorating employee inertia: auto-enrollment. Automatically enrolling new employees in the company DC plan, with the proviso that they can opt out if they would rather not participate, is not brand new. But automatically enrolling current
employees who had not been participating in the plan is
Automatically enrolling current employees under the same terms as new employees are began to appear in the report just this year, and went from not registering to being the practice at 21% of the firms served by the HR professionals who responded to SHRM this year.
The study showed a wide range of results concerning retirement-related advice:
- Advice offered online is down slightly; 55% of employers made it available in 2012, and half do so now.
- Retirement advice offered to a group or in a classroom is made available by 41%, the same level as in 2012.
- Availability of retirement-related advice offered one-on-one is growing slightly, and stands at 47%, up from 44% in 2012.
- Retirement-preparation specific planning advice grew twice as much as one-on-one advice, rising from 39% in 2012 to 45% in 2016.
And being on the cusp of implementation of the Department of Labor’s fiduciary rule makes the results concerning advice especially interesting. Will those numbers go down in next year’s survey?