Winter 2010
Plan Design Features Gaining in Popularity
Several recent surveys again demonstrate that certain plan design features are being incorporated into increasing numbers of retirement plans.
Features such as automatic enrollment, Roth 401(k) or
403(b) contributions and relaxed eligibility requirements are becoming more popular with each passing year.
According to the 52nd Annual Survey of Profit Sharing and 401(k) Plans by the Profit Sharing/401(k) Council of America (PSCA), 42 percent of 401(k) plans used automatic enrollment at the end of 2008, an increase from 36 percent over the year before. Of all plans that have adopted it, most (84 percent) applied auto enrollment to new hires only and 16 percent used it for all non-participants.
Roth 401(k) contributions were permitted by nearly 37 percent of plans, up from 30 percent in 2007. Of those eligible to make Roth contributions, almost 16 percent did so, compared to 13 percent in the previous year.
Less restrictive eligibility is also becoming a more common plan design feature. More than half of plans responding to Hewitt Associates’ biennial Trends and Experience in 401(k) Plans survey allow immediate eligibility (in other words, no age or service requirements). Nearly 75 percent of plans did not have a service requirement for participation in 2009, up from 61 percent in 2007.
A large proportion of plans (56 percent) had no service requirement for receiving the employer match, an increase from 44 percent in the previous survey.
Highlights of the PSCA survey, which reflects the experience of more than 900 plans with 7.4 million participants and more than $600 billion in plan assets, are at http://tinyurl.com/PSCA2008Survey.
The Hewitt Associates survey, which includes results regarding the use of safe harbor plan design, is at http://tinyurl.com/HewittTrends2009.
If you are interested in adding automatic enrollment or a Roth feature to your plan, contact your client service consultant.
