Human Resources Perspective: A Survey of Larger 401(k) Plans

HUMAN RESOURCES
PERSPECTIVE: A SURVEY OF
LARGER 401(K) PLANS

2
Contents
 Methodology
 Strategic goals of 401(k) plan
 Retirement preparedness
 Plan design and features
 Target date funds
 Respondent characteristics
 Appendix
– Retirement Saving and Spending Study, June 2015, Influence of matching
contributions and satisfaction with target date funds

3
Methodology
 Representative national study of 401(k) plan sponsors of $100 million+, n= 269
 Executives in human resources, employee benefits, plan administration and benefits
administration responsible for selecting, evaluating or monitoring providers,
services and investments for their organization’s 401(k) plan
 Conducted as a blind study by Brightwork Partners from September 8th through
November 15th 2016, n= 169 by telephone (Form 5500 sampling frame), the balance
online
 Oversamples plans $500 million+ which are then weighted back to naturally
occurring proportions:
N =
Weighted
Proportion
$100 million to less than $250 million 96 53%
$250 million to less than $500 million 75 23%
$500 million to less than $1 billion 49 12%
$1 billion or more 49 12%

4
Contents
 Methodology
 Appendix

5
Human Resources Perspectives: A Survey of Larger 401(k) Plans,
Conducted for T. Rowe Price by Brightwork Partners LLC.
401(k) plan sponsors with $100M+ plan assets
41%
57%
64%
69%
85%
Helping retired employees manage
the income from their 401(k)s
Recruiting new employees
Enabling employees to retire at
their preferred retirement date
Retaining talent
Helping employees save for a
financially secure retirement
Is (each item) a major strategic goal of your organization's 401(k) retirement plan
benefit, a minor goal or not a strategic goal at all?
As of 2016. Base: total interviews. “Major Goal.”
Goals of 401(k) Retirement Plan Benefit
Q. 4

6
Contents
 Methodology
 Appendix

7
To what extent do you agree with the following statement: we have a responsibility to
help our 401(k) participants achieve retirement preparedness in order to have an
adequate income in retirement:
As of 2016. Base: total interviews.
Organization's Responsibility to Participants
Q. 7
67%
32%
1% A great deal
Somewhat but not a great deal
Not very much/ Not at all

8
In general, how do you feel about the retirement preparedness of your organization’s
401(k) participants today compared to two years ago, would you say it’s:
Participants' Preparedness for Retirement
Q. 10
16%
47%
33%
2% 2% Much better
Somewhat better
About the same
Worse
Not sure

9
Do you have a formal, ongoing metric your organization uses to track the retirement
preparedness of your employees or don’t you?
Employee Retirement Preparedness Metric
Q. 5
48%
51%
1%
Have a metric
Don't have a metric
Not sure

10
Is that a ...
As of 2016. Base: Have employee preparedness metric (48%).
Metric Provider
Q. 6
25%
52%
21%
2% Proprietary metric you developed
in-house without support from an
advisor, consultant or
recordkeeper
Metric provided by your
recordkeeper
Metric provided by your advisor
or consultant
Other

11
Contents
 Methodology
 Appendix

12
Auto escalation is also known as auto increase.
48%
55%
58%
72%
89%
13%
9%
11%
6%
2%
Periodic enrollment of non-participants
An investment reenrollment program to
default participants into a qualified default
investment alternative(QDIA) you may offer
An auto escalation feature in which the
participant's deferral rate is increased
automatically on an annual basis
Auto-enrollment
An employer matching contribution up to
some level of a participant's contribution
Offered Expect to Offer
78%
69%
64%
60%
Does your organization’s 401(k) plan have (each item), or not? Over the next two years,
do you expect to offer this, or not?
As of 2016. Base: total interviews
401(k) Plan Features Offered/Expect to Offer
Q. 31, 32
91%

13
76%
68%
Plans that have retirement
preparedness metric
Plans that do not have retirement
preparedness metric
Does your organization’s 401(k) plan have [auto-enrollment], or not?
As of 2016. Base: total interviews. “Have auto-enrollment.”
Auto-Enrollment
By Retirement Preparedness Metric
Q. 31

14
55%
41%
preparedness metric
preparedness metric
Does your organization’s 401(k) plan have [periodic enrollment of non-participants], or
not?
As of 2016. Base: total interviews. “Have periodic enrollment of non-participants.”
Periodic Enrollment of Non-participants
Q. 31

15
63%
52%
preparedness metric
preparedness metric
Does your organization’s 401(k) plan have [an auto escalation feature in which the
participant’s deferral rate is increased automatically on an annual basis], or not?
As of 2016. Base: total interviews. “Have auto-escalation.”
Auto-Escalation
Q. 31

16
12%
33%
47%
Resistance to the company's action
The perception by participants that
their current deferral rate is
adequate
Not being able to afford the
increases
As far as you know, when employees opt out or decline to participate in your auto
escalation program, is (each item) a major reason, a minor reason or not a reason at all?
As of 2016. Base: Have auto escalation (58%). “Major Reason.”
Reasons for Opting out of Auto Escalation
Q. 41

17
Do you consciously manage your compensation strategy to increase pay by at least as
much as your auto escalation amount, or are the two values unrelated?
As of 2016. Base: Have auto escalation (58%).
Managing Compensation vs. Auto Escalation
Rate
Q. 38
21%
79%
Consciously increase pay by
at least auto escalation
amount
Pay and auto escalation
values are unrelated

18
Do you consciously manage your compensation strategy to increase pay by at least as
much as your auto escalation amount, or are the two values unrelated?
As of 2016. Base: Have auto escalation (58%). “Consciously increase pay by at least auto escalation amount.”
Managing Compensation vs. Auto Escalation
Rate
Q. 38
By Defined Benefit Plans
35%
11%
Organizations that also offer a
defined benefit plan
Organizations that do not offer a
defined benefit plan

19
Which matching formula more closely resembles your policy: a traditional match which
might match $1 for each $1 of contribution up to 3% or a stretch match formula which
might match 50 cents for each $1 contribution up to 6%?
As of 2016. Base: Employer offers a match (89%).
Matching Formula
Q. 43
51%
38%
8%
3% Traditional match
Stretch match
We do both
Other

20
69%
63%
42%
29%
The stretch match might not be well-received
by employees due to the required higher
contribution rate
We're concerned that the higher contribution
rate is beyond many employees so they would
lose out on the match
Because we're not sure it's really cost-neutral
relative to the traditional match-it could end up
costing us more
We're not familiar with the stretch match
concept
I’m going to read several reasons plan sponsors sometimes give us for offering a
traditional match instead of a stretch match. For each, please tell me if that describes
your situation very closely, somewhat closely, not very closely or not closely at all.
As of 2016. Base: Employer offers traditional match (45%). “Somewhat / Very Closely.”
Reasons for Offering Traditional Match
Q. 44

21
Leakage of retirement plan assets due to defaults on plan loans, hardship withdrawals
and cash-outs can reduce the retirement preparedness of participants. To what extent is
leakage a problem for your organization’s plan, is it:
Leakage
Q. 8
17%
53%
30%
Major problem
Minor problem
Not a problem at all

22
58%
53%
52%
50%
47%
16%
14%
2%
A financial wellness program to help participants manage their day-to-day
finances more successfully but which does not include individualized
financial counseling
Education services which project the impact to account balances at
retirement due to leakage
Payroll deduction into retail savings or investment accounts apart from
401(k) contributions
A financial wellness program to help participants manage their day-to-day
finances more successfully which includes individualized financial
counseling
Debt management tools and services
A student loan repayment tool which helps employees select a repayment
plan with directed payroll deductions of student loan payments. (An
example of this type of service is Student Loan Genius)
A student loan repayment benefit in which you match a portion of the loan
payment made by employees
Other
Some plan sponsors are offering various programs to address leakage. To address this
leakage, do you offer (each item), or not?
As of 2016. Base: Leakage is a major or minor problem (70%).
Programs Offered To Address Leakage
Q. 9

23
18%
25%
52%
9%
5%
4%
Environmental, social and governance mutual
funds, also known as ESG funds
Managed payout funds which regularly
distribute as income a certain proportion of the
fund's value based on investment returns
A periodic withdrawal plan feature for
terminated participants
Offer Expect to Offer
56%
29%
27%
Does your organization’s 401(k) include (each item), or doesn’t it? In the next two years, do
you expect to begin offering (each item), or not?
401(k) Specialty Features Offered/Expect to
Offer
Q. 26, 27

24
Contents
 Methodology
 Appendix

25
Survey Notes for Investment Menu
Questions
 A number of questions in the survey address the investment menu of
plans. Because respondents of the survey are human resources and
benefits professionals, the responses represent the HR/Benefits
managers’ perspectives of the investment strategy for their plans. T.
Rowe Price considers the investment menu findings as directional
information.

26
Does your organization’s 401(k) plan offer target date funds, by which we mean funds,
usually designated by the year in which the participant expects to retire, which
automatically adjust their asset allocation along a predetermined glide path, or not?
As of 2016. Base: total interviews
Target Date Funds
Q. 17
83%
17%
1% Offers target date funds
Does not offer target date funds
Not sure

27
Are the target date funds you offer designated as the Qualified Default Investment
Alternative or QDIA for your organization’s plan, or not?
As of 2016. Base: Offer target date funds (83%)
Target Date Funds As QDIA
Q. 18
88%
9%
3% 1% Designated as the QDIA
Not designated as the QDIA
Do not have a QDIA
Not sure
Plans that Offer Target Date Funds

28
Are your target date funds proprietary funds managed by your recordkeeper, or aren’t
they?
As of 2016. Base: Offer target date funds (83%).
Target Date Funds are Proprietary
Q. 20
49%
45%
5% 1% Are proprietary funds
Are not proprietary funds
Some are, some aren't
Not sure
Plans that Offer Target Date Funds

29
49%
36%
31%
30%
17%
Off-the-shelf target date funds which
are actively managed
hold both actively-managed
investments and index funds
Custom target date funds which include
a glide path specific to your plan's
objectives and the demographics of
your workforce
are index funds
Organization does not offer target date
funds
Does your organization’s 401(k) plan offer (each item) or not?
Target Date Fund Types Offered
All Plans
Q. 22

30
2%
2%
1%
1%
2%
3%
41%
37%
35%
33%
57%
60%
63%
63%
Custom target date funds which include a
glide path specific to your plan's objectives
and the demographics of your workforce
Off-the-shelf target date funds which hold
both actively-managed investments and
index funds
Off-the-shelf target date funds which are
index funds
Off-the-shelf target date funds which are
actively managed
Not Sure Not Satisfied Somewhat Satisfied Very Satisfied
How satisfied are you overall with (each item)?
As of 2016. Base: Offers this type of target date funds.
Satisfaction With This Type of Target Date
Fund
Q. 24

31
Contents
 Methodology
 Appendix

32
50%
36%
10%
3%
1%
1%
Human resources/employee benefits
Benefits administration
Plan administration
Plan committee
Legal
Business unit/line operations
What is your primary functional activity?
Functional Activity
Q. 2

33
25%
20%
14%
10%
7%
6%
6%
6%
3%
2%
1%
Professional or business services
Manufacturing
Financial Industry
Other Services
Health care and social assistance
Information industry
Trade, transportation or utilities
Construction
Agriculture, natural resources or mining
Educational services
Leisure and hospitality
Industry

34
Region
Q. 55
18%
25%
34%
23%
West
Central
South
East

35
Contents
 Methodology
 Appendix

36
Methodology
 3,026 working adults 18+ currently contributing to a 401(k) plan or
eligible to contribute and having a balance of $1,000+
 1,027 adults retired in the last one to five years with a Rollover IRA or
left-in-plan 401(k) balance
– Active participants and retirees conducted online February 19 through
March 3, 2015
 255 Millennials (18–33 years old) working and eligible for a 401(k)
plan at current employer but not contributing and do not have a
balance in that 401(k)—eligible nonparticipants (ENPs)
– Conducted online March 4 through March 25, 2015
Retirement Saving and Spending Study RSS2 © 2015 Brightwork Partners LLC. All rights reserved
REPRESENTATIVE NATIONAL SURVEYS OF:

3737
By Worker Generation
Influence of Match on Contribution
10%
11%
25%
15%
31%
23%
11%
22%
59%
66%
64%
63%
Millennial
Gen X
Baby Boomer
Total Workers
On factors other than the match terms To take partial advantage of this match
To take full advantage of this match
Base: Workers, expecting an employer match (86%)
To what extent is your contribution rate determined by this match? You set your
contribution rate...
Q.46

38
Q. 84
Target Date Funds
Satisfaction with Target Date Funds
by Retirees and Workers
As of 2015. Base: Workers and retirees who hold target date asset allocation funds.
All things considered, how satisfied are you with [your target date funds]?
3%
2%
5%
8%
11%
14%
9%
13%
52%
63%
77%
61%
60%
41%
23%
9%
29%
22%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Retirees
Total Workers
Baby Boomer
Gen X
Millennial
Not satisfied at all Not very satisfied Somewhat satisfied Very satisfied

Human Resources Perspective: A Survey of Larger 401(k) Plans

Human Resources Perspective: A Survey of Larger 401(k) Plans

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