PLANADVISER - January/February 2018 - 9

plan focus
Steady Growth
Highlights of BrightScope's proprietary research
W
actual employer dollars that went
hen Americans lament the death of pension plans,
it is often in the context of what the employer once
did for the employee. Often not discussed are the
into these pensions,
and how that money might compare with what is put into
various retirement plans now. It is particularly interesting
to note that employer dollars as a percentage of employee
contributions increased from 2010 through 2016, according
to BrightScope data. Employers are making a larger
percentage of dollar contributions to the defined contribution
(DC) marketplace than ever before.
While many employees may be upset that they have
no access to a defined benefit (DB) plan, there is reason to
emphasize the value and dollar amount employers contribute
to DC plans. When considering that the single most
critical driver of one's retirement income accumulation success
is how much is put into one's account, it is clear that
employer contributions will be a meaningful multiplier to
participant retirement outcomes and industry flows.
What has been driving the increase in employer contributions?
The overall numbers make it difficult to determine
exactly, but one can guess that it is related to the increased
usage of automatic enrollment and " auto " -escalation. The
employer-match auto-deferral rates are often the most
powerful guide to a participant's saving level. Also, with
plan sponsors setting higher initial default deferral rates,
While many employees may be
upset that they have no access
to a defined benefit (DB) plan, there
is reason to emphasize the value
and dollar amount employers
contribute to DC plans.
continued growth is anticipated.
Sister publication PLANSPONSOR's 2017 Defined Contribution
Survey indicates that nearly 47% of plans that use
auto-enrollment have a default rate of 4% or more, and that
has been a growing trend. Interestingly, plans with higher
default deferral rates tend to have higher overall employee
deferral rates. These higher rates across a larger participation
segment can increase employer contributions overall.
Companies will continue to examine their plan contributions,
whether made as matches or profit-sharing contributions,
or in other forms. Proponents of the recently signed
tax bill have cited the low business rate, noting that employers
can reinvest what they save in the company and in
employees. Whether this will lead to increased retirement
plan savings remains to be seen, but it is a possibility. -PA
Employer to Participant Contributions ($ billions)
n Employer contributions n Participant contributions
$159
$108
$113
$169
$119
$179
$126
$190
$134
$202
$141
$217
$139
$218
Source: BrightScope Defined Contribution Plan Database. Like PLANADVISER, BrightScope is a Strategic Insight company.
2010
2011
2012
2013
2014
2015
2016
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