Employers generally offer 401(k)s to attract and retain productive workers, not to propel those employees into a secure retirement. The majority of companies (51 percent) offer a 401(k) to keep high performing employees happy, according to a recent Wells Fargo and Boston Research survey of 357 employers. Less than half (45 percent) of the firms say their benefit programs primarily aim to help workers achieve a financially sound retirement.
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The top 401(k) concerns among plan sponsors are the stock market’s impact on account balances (26 percent) and worker appreciation and use of the plan (25 percent). Only 19 percent of employers have a top priority of providing employees with the financial ability to retire. Just 10 percent of the employers in the survey project each employee’s retirement income and compare it to their expected retirement needs.
However, employers do want to be involved in some aspects of retirement planning. The plan sponsors say their role in retirement savings is to provide 401(k) contributions (95 percent) and help employees understand how much they need to save for retirement (89 percent). Slightly fewer companies are interested in helping employees understand how to invest their savings (71 percent), automatically enrolling workers in the retirement plan (62 percent), and managing employee investments for them (5 percent).
The company representatives surveyed say earning the 401(k) match is the top reason most workers save in a 401(k) (42 percent). Less than a third (30 percent) of the firms indicated that employees utilize the 401(k) primarily to save enough to retire comfortably. Other reasons companies give for employee 401(k) participation include tax breaks (14 percent), automatic enrollment (7 percent), and employer encouragement (5 percent).
Most of the firms in the survey (61 percent) plan to tinker with their 401(k) plan in the next 18 months. The most frequently projected alterations are to increase the number of investment options (14 percent), boost the 401(k) match (12 percent), add a Roth 401(k) option (12 percent), and introduce automatic enrollment (10 percent). Smaller numbers of plan sponsors are interested in adding automatic contribution increases (6 percent), decreasing the 401(k) match (3 percent), or adding an annuity feature to the plan (2 percent).
The employers say their primary goals for 401(k) participants in 2010 are to educate employees about retirement savings needs, increase 401(k) participation, and to increase the amount participants save. Some employers are also interested in promoting investment diversification (9 percent), reducing 401(k) loans and early withdrawals (4 percent), or helping employees to develop a plan to make their retirement savings last for the rest of their life (2 percent).