A new poll shows that the shift to defined-contribution retirement savings plans is beginning to register with employees and applicants.
The move away from defined-benefit plans to defined-contribution plans is hardly news. But a recent poll of HR professionals suggests that this reality is now being acknowledged by job candidates and employees.
In a recent poll of 220 HR professionals conducted by Human Resource Executive® and South Norwalk, Conn.-based ERC Dataplus Inc., 56 percent of respondents said job applicants ask about 401(k) or 403(b) plans either all of the time or most of the time. In comparison, 32 percent of those polled indicated they asked about traditional defined-benefit plans all of the time or most of the time.
"Employees may not welcome the change, but they seem to acknowledge it," says Michael Markowich, a benefits consultant based in Huntingdon Valley, Pa.
Markowich, who played a key role in designing the survey questionnaire and analyzing the findings, believes companies that assist their employees in retirement planning in this environment will have a competitive edge in recruiting and retaining talent. "If companies cannot afford the costs of traditional pensions, then perhaps investment in financial educational seminars may be a viable cost-effective alternative," he says.
As might be expected, most of the respondents felt both DC plans and traditional DB plans were instrumental in recruiting talent. The degree of importance, however, varied significantly by plan type. Roughly 90 percent said their DC plans were either very helpful or helpful in attracting workers, while about 60 percent described their DB plans that way.
Similarly, the respondents said their DB and DC plans served as effective retention tools. In terms of retention, however, the gap between plan types was much less evident, with respondents giving nearly equal weight to each (roughly 79 percent in the case of DC plans, compared to 74 percent for DB plans).
Of those working at companies with DB plans (43 percent of the respondents), roughly 40 percent indicated they were either making changes to their plans or expected to be making changes soon. Asked what kind of changes were being implemented or considered for their plans, 7 percent said "terminating it" and 12 percent said "converting it to a cash-balance plan."
About 91 percent of the respondents said their companies offered a DC plan.
Despite its usefulness in increasing plan participation, automatic enrollment remains rare in most organizations, with one in four respondents with a DC plan (25 percent) noting they automatically enroll new participants. But that could see a noticeable increase in the future, with 19 percent of the respondents indicating they were considering the use of this approach.
As might be expected, only a handful of the respondents (6 percent) said their organizations were offering the recently enacted Roth 401(k). But the study revealed that 22 percent of the respondents were considering adding it to their retirement arsenal. Of the 70 percent of the respondents whose organizations were not considering a Roth 401(k), 39 percent reported the primary reason was they didn't perceive value in offering it while 21 percent said the potential administrative headaches were the principal factor.