Administration October 31, 2016

Use of Certain 401(k) Plan Auto Features Declines

Use of auto-deferral increase and auto-rebalancing has declined in the past two years; however, there is increased interest from 401(k) plan sponsors in offering participants investment advice, research finds.
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There was no change in 2016 in automatic enrollment adoption by 401(k) plans, according to a Cogent Wealth Report, “One Size Does Not Fit All DC Sponsors.” 

While auto-enrollment remains the most popular auto-feature offered in 401(k) plans today, just three in ten (29%) plans take advantage of this option. However, usage does increase with plan size, with the large plan segment (51%) representing the highest proportion of plan sponsors with auto-enrollment as a plan feature.

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In addition, the research found a significant decrease in the reported plan sponsor usage of auto-increase of deferral rates and automatic rebalancing compared with 2014. Currently, one in five (19%) plans offer automatic rebalancing, which is down from 26% two years ago. Use of auto-increase of participant deferral rates has fallen to 13% from 17% since 2014. Declines in usage for both auto-features are driven primarily by decreases in the micro and large plan segments.  

Employer matching contributions are offered by fewer plans in 2016, representing a decline to 50% overall, down from 57% in 2015. Significant decreases occur across all plan size segments in offering contributions commensurate with at least a portion of the amount of money being deferred by the participant to the plan.

The report says, “Decreasing use of these features can be related back to the most commonly cited primary focus of plan sponsors need to cut fees. In a cost-constrained environment, plan sponsors may be less likely to offer auto-features if they result in a higher total plan cost of administration and may “opt out of auto” upon changing recordkeepers in efforts to maintain or lower costs.”

However, looking forward, the research found increases in the likelihood of plan sponsors adopting auto-enrollment, automatic rebalancing and auto-increase of deferral rates. Overall, 17% of plan sponsors report a top 3-box score for likelihood to initiate offering auto-enrollment for their respective 401(k) plans—up from 6% in 2015. With regard to auto-rebalancing, almost as many plan sponsors overall (17%) intend to add this feature as there are plan sponsors who already offer it (19%). In addition, 18% overall report high likelihood of adopting the auto-increase feature.

NEXT: Investment options and advice

Despite plan sponsors offering fewer investment options within their 401(k) plans than they have in the past—an average of 13 today compared with upwards of 20 in previous years—there is a widening of the breadth of investment products on plan menus, according to the report. The vast majority (85%) of 401(k) plan sponsors select a default investment option in which participant contributions are placed if participants are automatically enrolled, have not made, or do not want to make investment choices themselves.

Target-date funds (TDF)s continue their collective reign as the most popular default investment option in all but the micro plan segment, which carries on its reliance on money market funds. Among small plan sponsors, the use of managed accounts and target-risk funds as default options is increasing. However, mega plans report the most frequent use of managed accounts as the default.

The research found 80% of plans currently make available to participants some form of investment advice, with the most common type being access to a financial adviser (46%). Reliance on financial advisers is even greater among smaller plans, which tend to be sold and serviced by financial advisers. Access to online automated investment advice is more likely to be offered by the plan provider (32%) rather than through an independent third-party (17%) although there are differences by plan size. Mid-sized, large and mega plans are more likely to offer access to an independent third party platform compared with smaller plans. Only 15% of plan sponsors offer participants one-on-one advice provided by an independent third party.  

There is relatively strong interest among plan sponsors in adding new types of investment advice. About one-quarter of current non-users indicate they are likely to start offering one of three types of advice: access to a financial adviser (27%), one-on-one advice provided by an independent third party (25%) and online investment models provided by the plan provider (23%). Interest in adding these new modes of advice delivery is stronger among larger plans with at least $20 million in assets.

The research paper is derived from an online survey of a representative cross section of 1,435 401(k) plan sponsors across micro, small, mid-sized, large and mega plans conducted from February 15 to March 15, 2016.

Reader Responses October 31, 2016

SURVEY SAYS: Workplace Halloween Celebrations

Today is Halloween.
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I recently read about a survey that found dressing up in costume and celebrating Halloween at work is good for employee morale.

Last week, I asked NewsDash readers, “Does your workplace celebrate Halloween, and will you be dressing in a Halloween costume for work?” I also asked them to share the best costumes they’ve worn or seen.

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Nearly four in ten responding readers (38.3%) said their company celebrates by workers dressing in costume, while 31.9% reported their company celebrates by workers bringing in food or having a little party. Nearly three in 10 (29.8%) said their company offers a prize for the best Halloween costume. Nearly 28% indicated their company does not celebrate Halloween.

Among the 31.9% who chose “other,” several reported their companies do pumpkin decorating or a pumpkin decorating contest, quite a few offer a party or trick-or-treating for employees’ children and a few offer prizes for best cubicle decorations. One reader noted that his or her company has a chili cookoff.

Asked whether they will be dressing in a Halloween costume for work today, 18.7% said yes, and 81.3% said no.

In comments about workplace Halloween celebrations, most agreed it was something fun or a morale booster, but there were a few that said they were distracting and hurtful to productivity. Others noted that some workers come into the workplace with inappropriate costumes. Editor’s Choice goes to the reader who said, “We won’t be wearing costumes, but we’ll be dressed as exhausted financial services workers anyway!” 

Thank you to everyone who participated in the survey!

NEXT: Best costumes

The best costumes some respondents have ever worn or seen include:

  • Male coworker as Ms. Piggy
  • Day of the Dead Madonna...scarily cool!
  • CAME AS A PIECE OF GUM STUCK TO THE BOTTOM OF A SHOE. HAD SHEET OVER HEAD AND THE SHOE WAS STUCK TO THE TOP OF HIS HEAD WITH PINK STICKY STICKING OUT THE SIDE!
  • Kiss characters are the best I've seen. My best was one year when I dressed as a 5'2" man and my 6'4" husband dressed as a woman. We were quite the couple!
  • Pinhead from Hellraiser
  • I believe the best one I worn was when I attended a party as Groucho Marx and my wife went as Karl Marx.
  • When I worked for a university I wore my daughter's graduation gown, hat, honors scarf, etc. Oddly, they thought that was unique
  • People of Walmart
  • A guy was dressed as the "Operation" patient, and the parts to be removed were electrified, so if they were touched his nose lit up.
  • Too many to choose from.
  • a coworker that was from Russia, dressed up as a "mile high club," "sexy" flight attendant. She didn't understand the concept of the "mile high" club name badge. The CEO politely asked her to leave the managers meeting that afternoon.
  • camper who was mauled by a bear
  • one of my coworkers dressed as Michael Phelps with all the medals
  • Saw a southern belle in full hoop skirt at work
  • The best costume was not so much a costume as it was a demeanor. It was at a Halloween party and one of the guests was dressed in something white, but it was hard to see because he scurried around under tables all night and reached out as though to beg for food. It was creepy and funny all at the same time
  • Had a team enter as a Tetris game. We built and dressed up as the different shapes and choreographed a skit to music. Pretty sure we won that year!
  • I aim for costumes that aren't... The other year I was Mary Poppins - black skirt, white shirt, red tie and a bowler hat.
  • I choose to dress as a witch...they have the best hats!
  • The internal audit department once dressed as headhunters. On second thought, it wasn't a costume....
  • My best was a cereal/serial killer. Just decorate a large shirt with small cereal boxes each with a knife and fake blood. Most will not get it until you tell them.
  • My neighborhood in Wisconsin had an elaborate Halloween display. There was the traditional upright coffin standing in one yard. What I didn't know is that it wasn't empty. The man's costume wasn't that original but he had the gift of timing. He about scared the life out of me when he came out of the box with his mummy yell. I just didn't see it coming and his timing was perfect.
  • dressing like other co-workers
  • My group one year had a 70's theme and we created a dance floor with disco ball in our office and a small group of us dressed as the jackson five. great memory.
  • Group costumes here are popular, the :Robert Palmer Girls", the folks from Clue, people dressed as the scale ( a deer for do, a sun for re, etc.) I seem to like those the best.
  • We are not very creative, but one year we thought we did pretty good by dressing up as salt and pepper shakers.
  • Homemade vampire costume I wore many years ago. No one recognized me.

Verbatim 

It's something fun to celebrate before the chaos of year end begins to set in.

It's fun...helps relieve some of the stress leading into the end of the year planning..

I HAVE NEVER LIKED DRESSING UP FOR HALLOWEEN BUT I DO ENJOY SEEING THE CUSTUMES OTHER PEOPLE HAVE ON THAT DAY

Our company stopped allowing us to dress up after 9/11.

fantastic idea, anything that gives people a happy break will always raise morale.

It has become a very important holiday because its popularity has risen. It also lets employees show a side of themselves that no one has ever seen.

Always fun until HR has to be the Costume Police.

Fun as long as people are respectful.

I *LOVE* Halloween and typically take the day off to watch movies, help out at my kids' school, and get ready for trick-or-treating. Being absent also helps avoid the workplace costume drama.

"Celebrating" Halloween in the workplace is a distraction and a waste of time. Unless your coworkers are under the age of 12.

Verbatim (cont.) 

Dressing in costume is an expenditure of valuable time I cannot afford. I barely have time to read NewsDash.

We won't be wearing costumes, but we'll be dressed as exhausted financial services workers anyway!

I think anything that can break up the monotony and put smiles on people's faces is great at work.

It's a fun diversion

I happen to be on vacation that day, so I won't be partaking in the fun. I cracked up when I read the email from HR saying people were invited to dress up - providing the costume is work appropriate. I didn't realize that needed to be explained to adults, but apparently I was wrong.

Getting dressed in business clothes is costume enough for me.

I agree it's great for morale. it's fun to see people be creative, especially when it's someone that you wouldn't expect it from. we have our annual United Way fundraiser on Halloween and combine the holiday and charity event.

it's a great morale builder and fun.

Former company combined costume contest with United Way campaign. Employees paid $5 to participate and everything went to United Way. There were a lot of creative and fun costumes.

We used to have employees dress up in costume but found that, while it was good for morale, it was bad for productivity. No one worked that day because they were too focused on the costumes. It was finally banned when someone dressed in a costume that was making fun on another department. Unfortunately common sense and respect aren't very common these days.

Verbatim (cont.) 

You can count on someone taking it too far, and if you can't spot them... look in the mirror!

It's a sad commentary on the results of today's "be offended" society, as all 'holiday' celebrations have now been banned here. Perhaps the best costume would be for everyone to put on their big boy/girl pants.

Our children's party and office-wide trick or treat is nothing more than a thinly veiled reason for everyone to bring in more candy than necessary. The biggest trick or treaters are the parents that tow their toddlers around, you know that child is not eating all that candy. That said, I always bring in candy my staff will eat.

I think it's fun but there's always the risk that someone is going to go down the inappropriate route. I think employees visiting HR when we were dressed up elicited good comments but the downside is the jealousy issue always comes up. They can - we can't. No easy answer.

fun

Mixed feelings, here people are strongly encouraged to participate, and have to defend why you don't participate. Would like a little less pressure to participate in the festivities.

I think it's really neat when the workplace allows for some fun and creativity on a personal level.

There are people every day in the office who are dressed in a costume - they are dressed as employees/workers.

I have been in the workplace 25 years. Five years ago I began working at my current employer and they celebrate Halloween in the office to the extreme. The office is essentially open but nothing really gets done. Crazy!

We used to have a costume contest but one employee complained that Halloween was against his faith so we stopped. He no longer works here, so now we have a pumpkin decorating contest.

I'd rather hang out with the grandkids.

 

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Asset International or its affiliates.

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