Your company’s retirement plan works best when employees are using it … and using it to its full potential. So how confident are you that it’s happening?
Why not compare your own data against the 3.5 million participants of 138 defined contribution plans? That’s the data recently pulled by the folks at Aon Hewitt Consulting.
And you can use it to figure out how well folks are using this most important benefit.
Check out these five key usage benchmarks:
Benchmark 1: Percentage of employees participating
Of course, ideally every one of your eligible employees would participate in your company’s retirement plan. Probably not going to happen. But we are certainly getting closer.
Compare your current participation rate to this number: 79%. That’s the percentage of folks participating in their employer’s plan at the end of 2014.
That’s the highest level since Aon Hewitt began tracking this data in 2002.
Benchmark 2: Average 401(k) plan balance
One of the best ways to get even more people participating is to see some solid returns. When folks see how quickly savings can grow, they’re more likely to want to be a part.
There’s encouraging news on this front as well. The average 401(k) balance at the end of last year: $100,320. Is that in line with what your people have amassed?
Hopefully you’re following this trend, too. That balance benchmark is up from $91,060 at the end of 2013.
Benchmark 3: Percent increasing contribution rate
It’s not enough to get employees participating in your plan. To really see those savings grow, people need to up the amount their contributing as well.
So what’s the current yardstick on that front? Nearly a quarter (24%) of plan participants increased their contribution rates in 2014.
Not everyone will be in a position to do this regularly. But remind folks that even increasing by 1% can make a major different.
This makes another compelling face for putting automatic escalation features in place. Worth considering, especially if your number is below this benchmark.
Benchmark 4: Percent rebalancing their portfolio
Putting more money in will only get you so far if you don’t have the right investment mix in your portfolio. Which is why employees need to rebalance their accounts periodically.
Suspect that’s not happening? You’re in good company. Just 15% of plan participants rebalanced their portfolio last year. That’s one of the lowest trading years on record.
If that data mirrors your own employees’ experience, you might want to offer them access to help tools. Anything from managed accounts to online help will make employees better consumers capable of making smarter investment decisions.
Benchmark 5: Average number of funds invested in
Finally, what’s the optimal number of funds to invest in? While there’s no right answer, the average number has stayed fairly consistent in recent years.
In 2014, employees invested in 3.6 different vehicles, down just slightly from 3.7 the year before.
That may have something to do with employers offering fewer options in an attempt to make things easier for employees to manage. It’s a trend worth following.
Info: For more on the Aon Hewitt survey, click aon.mediaroom.com/2015-05-28-Despite-Record-High-401-k-Plan-Balances-Few-Workers-are-Actively-Managing-their-Portfolios
