Employers are getting more proactive about offering incentives to make it easier for employees to use a 401(k) plan, according to a study from Deloitte Consulting LLP.
According to the New York-based company's "401(k) Benchmarking Survey," employers, worried about their employees' ability to save for retirement, have undertaken a number of initiatives to make it easier for employees to enroll in the plans — including automatic enrollment, automatic step-up increases and offering 401(k) plans to new employees.
The study included a survey showing that 48% of employers who responded said they gave new employees immediate eligibility for the 401(k) plan, compared with 49% in 2006 but up from 26% in 2002.
Forty-two percent of employers said they used automatic enrollment, nearly double the 23% in the last survey, released in 2006.
In addition, companies are also more likely to use automatic step-up provisions. This means that participants' deferral is automatically increased each year until it reaches a point agreed upon by plan sponsors and participants.
Thirty-five percent of the em-ployers said they used automatic step-up provisions, nearly double the 18% reported in 2006.
A total of 436 employers completed the survey online in late 2007 and early this year. The companies were distributed evenly by geography, size, and industry and ownership status.
Deloitte didn't release a study last year, but based on the new findings, it appears that employers are working harder to make saving for retirement easier for employees, said Mark Dzierzak, the firm's Chicago-based senior manager and 401(k) survey director.
"We're seeing that plan sponsors are taking more-decisive steps around these features they can put in their plans," he said.
"They're realizing that participants may need a bit of help," Mr. Dzierzak said. "They're recognizing they need to step up just a bit and be more decisive."
More companies have been requesting information about automatic enrollment, said Steve Dimitriou, managing partner of Mayflower Advisors LLC in Boston, which manages about $500 million in assets.
"We're not seeing a big change in the number of our clients that are adopting it yet," he said.
"In some industries, it just makes a whole lot more sense to have it," Mr. Dimitriou said. "If you have a lot of employees, it's an easier route to go."
Overall, Mr. Dimitriou said, he has noticed that employers want to help their employees save more easily for retirement. Most of the companies he works with allow employees to enroll in the 401(k) plan right after they start work, he added.
"That's much more the norm," Mr. Dimitriou said.
"People have demanded it, and companies have realized that in the end, it doesn't really cost us anything to let them in," he said. "If they're worried about cost, they can put in a waiting period on the match."
Employers are also using target date funds more often, with 57% reporting that they offered such funds, compared with 44% in 2006.
Lorraine Johnson, a financial adviser with Triangle Financial Advisors Inc. in Raleigh, N.C., is a proponent of target date funds. Her firm manages about $200 million in assets.
"What I do is look at the client's risk tolerance and figure out what mix of equity and income works for them," Ms. Johnson said. "I look under the hood of the target date fund and choose the one that's closet to their risk tolerance, and not necessarily the one that's based on the date that they'll retire."
Ms. Johnson likes the fact that target date funds are re-balanced periodically rather than requiring constant monitoring and re-balancing on her part.
"That way, the client doesn't have to remember to change anything, and the adviser doesn't have to remember to change anything," she said.
"That's a lot to be said for ensuring that it doesn't fall through the cracks," Ms. Johnson said. "That's a very good fail-safe plan."
Meanwhile, the survey showed that 81% of employers said they had increased their company match in the past year.
And yet, Kevin M. Reardon, a certified financial planner with Shakespeare Wealth Management Inc. in Brookfield, Wis., said that some of his clients are receiving less in company match dollars. His firm manages about $50 million in assets.
"The match level, in my opinion, is very meager," Mr. Reardon said.
"If you go back 10 or 15 years, they matched 50 cents for the first 6% and kicked in profit sharing," he said. "A lot of companies are only putting in 3%."
E-mail Lisa Shidler at [email protected].
