Employer retirement plans have been in the spotlight lately. Many employers are ahead of the game, offering workers a variety of options for saving and matching contributions.
So how does your company measure up against your peers?
Most are opting for traditional 401(k) plans, according to XpertHR’s 2021 Employee Benefits Survey. Sixty percent of employers surveyed offer these plans to workers – and 82% of them matched at least a portion of employees’ contributions.
The type of match employers offer participating employees varies. Here are the top five options from 2020, courtesy of a benchmarking report from investment firm T. Rowe Price:
- 50% up to 5% of employee pay (20% of plans)
- 100% up to 3% of pay and 50% up to the next 2% of pay (19% of plans)
- 100% up to 4% of pay (12% of plans)
- 100% up to 6% of pay (11% of plans), and
- 100% up to 5% of pay (9% of plans).
When looking at the waiting period for employees to be fully vested in their plans, 28% of employers surveyed by XpertHR allow workers to be vested immediately.
Other respondents chose differently, commonly opting for up to one year (13%), up to three years (14%), up to five years (17%) or up to six years (10%). Less common options were up to two years (7%), up to four years (6%) or more than six years (1%).
Rise of auto enrollment in employer retirement plans
Along with features like earlier vesting periods, more employers also use automatic enrollment to help employees maximize their savings in employer retirement plans.
Over 80% of plans serviced by T. Rowe Price have adopted automatic enrollment for participants, and 62% of them automatically increase employees’ deferral rates every year unless they opt out. The most common auto-enrollment rate for employee contributions was 6% of pay or higher, used by 36% of employers. Thirty percent had a 3% auto-enrollment rate.
Despite challenges this past year related to COVID-19, employees continued saving for retirement. In fact, average contributions to 401(k) plans rose slightly to 7.8% in 2020, T. Rowe Price said.