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

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The study reveals the views of human resources and benefits professionals administering 401(k) plans with assets of $100 million to over $1 billion. It took place in late 2016 and is based on telephone and online surveys of a nationally representative sample of 269 executives.

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

  1. 1. HUMAN RESOURCES PERSPECTIVE: A SURVEY OF LARGER 401(K) PLANS
  2. 2. 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. 3. 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. 4. 4 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
  5. 5. 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. 6. 6 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
  7. 7. 7 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 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. 8. 8 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 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: As of 2016. Base: total interviews. Participants' Preparedness for Retirement Q. 10 16% 47% 33% 2% 2% Much better Somewhat better About the same Worse Not sure
  9. 9. 9 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 Do you have a formal, ongoing metric your organization uses to track the retirement preparedness of your employees or don’t you? As of 2016. Base: total interviews. Employee Retirement Preparedness Metric Q. 5 48% 51% 1% Have a metric Don't have a metric Not sure
  10. 10. 10 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 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. 11. 11 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
  12. 12. 12 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 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. 13. 13 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 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. 14. 14 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 55% 41% Plans that have retirement preparedness metric Plans that do not have retirement 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 By Retirement Preparedness Metric Q. 31
  15. 15. 15 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 Auto escalation is also known as auto increase. 63% 52% Plans that have retirement preparedness metric Plans that do not have retirement 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 By Retirement Preparedness Metric Q. 31
  16. 16. 16 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 Auto escalation is also known as auto increase. 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. 17. 17 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 Auto escalation is also known as auto increase. 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. 18. 18 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 Auto escalation is also known as auto increase. 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. 19. 19 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 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. 20. 20 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 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. 21. 21 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 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: As of 2016. Base: total interviews. Leakage Q. 8 17% 53% 30% Major problem Minor problem Not a problem at all
  22. 22. 22 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 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. 23. 23 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 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? As of 2016. Base: total interviews. 401(k) Specialty Features Offered/Expect to Offer Q. 26, 27
  24. 24. 24 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
  25. 25. 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. 26. 26 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 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. 27. 27 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 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. 28. 28 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 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. 29. 29 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 49% 36% 31% 30% 17% Off-the-shelf target date funds which are actively managed Off-the-shelf target date funds which 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 Off-the-shelf target date funds which are index funds Organization does not offer target date funds Does your organization’s 401(k) plan offer (each item) or not? As of 2016. Base: total interviews. Target Date Fund Types Offered All Plans Q. 22
  30. 30. 30 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 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. 31. 31 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
  32. 32. 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? As of 2016. Base: total interviews. Functional Activity Q. 2 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
  33. 33. 33 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 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 As of 2016. Base: total interviews. Industry
  34. 34. 34 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 As of 2016. Base: total interviews. Region Q. 55 18% 25% 34% 23% West Central South East
  35. 35. 35 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
  36. 36. 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:
  37. 37. 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 Retirement Saving and Spending Study RSS2 © 2015 Brightwork Partners LLC. All rights reserved 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. 38. 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]? Retirement Saving and Spending Study RSS2 © 2015 Brightwork Partners LLC. All rights reserved 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

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