Data and Research June 21, 2017

A Plethora of Data to Help DC Plan Sponsors Benchmark Plans

BMO has issued a report giving details on participation rates, deferral rates, account balances and more.
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Compiling results from leading industry surveys, BMO Global Asset Management has created a report filled with data about defined contribution (DC) plans to help plan sponsors benchmark their plans. The aim is to help sponsors see how their plan compares to other companies in their industry.

The information shows minimum age requirements for plan eligibility by plan size, participation rates by plan size for the years between 2008 and 2015, participation rates by age in plans with automatic enrollment and without, and participation rates by salary. Not surprisingly, in plans without automatic enrollment, the participation rate for people making less than $30,000 a year is only 29%. However, 85% of those making $100,000 or more a year voluntarily participate in their plan.

BMO also shows participation rates by years of service, participation rates by industry between the years of 2011 and 2015, and the percentage of plans with automatic enrollment by number of employees between the years of 2005 and 2015. In 2005, among plans of all sizes, only 25% automatically enrolled participants. By 2015, that had grown to 58%. The charts also show the percentage of plans with automatic enrollment by industry between the years 2011 and 2015. The industry with the highest usage of automatic enrollment in 2015 was non-durable goods manufacturing.

BMO also gives the default deferral percentage of pay in plans with automatic enrollment between 2006 and 2015. The most common rate in 2015 was 3%. Employer matches have grown from 40% of plans in 2010 to 49% in 2015. BMO also shows the average matching contributions by industry type and the percentage of pay matched by industry type between 2007 and 2015.

The research gives the average deferral rate by industry sector between 2010 and 2015. For industries of all types, the average deferral rate in 2015 was 6.8%. By salary, the average deferral rate for those making less than $30,000 in 2015 was 4.4%, but 8.8% for those in the $100,000-plus income bracket.

NEXT: Account balances

 

Looking at account balances, in 2015, 75% of plans had participants with balances under $100,000, with 33% of those under $10,000. Only 25% of plans had people with balances of $100,000 or more. Among those under the age of 25, the average account balance was $4,048, but for those 65 or older, it was $200,358.

BMO also gave account balances by job tenure. For those in their place of employ for less than two years, it averaged $10,247. However, for those who had been there for a decade or more, it was $185,575.

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By industry type, agriculture, mining and construction companies had the highest average balance, $222,084. Education and health care companies had the lowest, $64,565. Lifecycle and target-date funds are the most commonly used default investments, used by 79% of plans in 2015, up from 49% in 2007.

The total plan cost in 2015 averaged 1.5%. However, for plans with $10 million or less in assets, it averaged 1.71%. The fees continued to decrease as plan size increased, with plans with more than $1 billion in assets averaging 0.51% in fees.

The 46-page BMO report, “DC Conversations: An Industry Assessment of Defined Contribution Plans,” can be downloaded here.

Benefits June 20, 2017

Employee Well-being Impacts the Bottom Line

The average U.S. worker eats more than half his meals on the job and spends several hours a week at work managing his finances or other personal responsibilities.

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During a recent webinar presented by Preventure, a national provider of corporate wellness solutions, executives from the firm urged benefit plan sponsors to “push their conversations from employee wellness to employee well-being.”

It may seem like merely an exercise in semantics, but, according to Preventure, employers that have truly embraced programming to help their employees make better decisions with their health and finances—i.e., those that have moved from promoting ad hoc wellness to holistic well-being—perform better economically over time.

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Preventure executives pointed to one study of the stock performance of 45 publicly traded Fortune 500 companies with “robust employee well-being programs.” The analysis showed that these companies outperformed their peers in the Standard & Poor’s (S&P) 500 index during 16 out of 24 quarters during the study period.

In terms of actually establishing well-being programming, Preventure urges employers to stop viewing employee happiness as a human resources (HR) function. Instead, employee well-being is an “end-to-end concern for the whole company.”

“When employees feel their employers care about them, they are so much more likely to stay around and  be an advocate for the employer outside the workplace,” said Laura Walmsley, chief client officer. “It has a profound impact on their engagement during the workday and their willingness to go above and beyond.”  

Walmsley urged employers to “clearly demonstrate to workers that executives and managers care about their workers. We love the use of direct messaging from leadership, to show [its] support,” she noted. “For example, with new well-being programming, you could make it a point to always include a recorded video message from the CEO on the portal—or executives could distribute letters to the home, encouraging participating in well-being programs.”

Another powerful way to boost the performance of well-being programming, according to Preventure, is to hold executives accountable for their participation. Further, policies and procedures should be put in place to ensure equitable programming outcomes. “In other words, don’t just have a fancy new fitness center at corporate headquarters … make it open for everyone and accessible for everyone,” Walmsley concluded. “Finally, measurement is very important—choose metrics that relate to and drive business success. If billable hours run your business, fewer sick days or PTO [paid time off] might be your metric. Other employers may measure for other goals.”

More research and information is available at www.preventure.com. 

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