Defined Contribution Plan Survey
Get the results of BlackRock's 2011 survey of plan sponsors and participants
BlackRock's annual defined contribution plan survey, expanded to include plan sponsors for the first time, finds that both participants and plan sponsors give high marks to current defined contribution plans for building savings.
Until recently, the primary emphasis of DC plans has been on helping employees accumulate assets throughout their working years with relatively little focus on the decummulation phase — the years in retirement when employees need to turn those accumulated assets into sustainable spending. With an estimated 35 million Americans expected to retire over the next decade, combined with the recognition that DC plans are increasingly central to retirement well being, it is not surprising that the focus is shifting from DC as a savings plan to DC as a source of retirement income. Fortunately, plan sponsors are well positioned to capitalize on their success in developing DC plans to begin providing guidance and support to meet the critical retirement spending need.
Key findings from the survey include:
- Participants see saving as their responsibility, but worry they are failing
Participants overwhelmingly accept responsibility for their retirement preparation, yet just one in five rates their own efforts as very effective and only 16% are confident they'll have enough money to retire on time. The survey clearly reveals the extent of their anxiety: more than one in four say they don't know how they will make ends meet, 8% say they may not retire at all, and 15% expect that they will have to get full or part time jobs after they retire. Plan sponsors share their concerns — 70% believe the majority of their participants have not saved enough for retirement.
- Participants give employers high marks for pre-retirement support but welcome even more guidance
On the whole, participants feel employers have been helpful in the saving and investing stage, with three out of five stating they "somewhat agree" or "strongly agree" that their employer is providing all the help it should, including the necessary tools, to enable them to reach a financially secure retirement.
- Participants and plan sponsor differ on post-retirement responsibilities
Perhaps the most significant finding in the survey is the gap between the participant need for post-retirement guidance and the limited responsibility plan sponsors feel for post-retirement concerns. This potentially troubling disconnect may be best understood as part of the changing perceptions of DC as the primary (and sometimes sole) source of retirement financial security.
- Participants find secure retirement income attractive, but plan sponsors are only now beginning to respond
When presented with the choice between a lump sum retirement payment and an option that includes a lifetime income stream, 94% of participants state that they are interested in an income option. Unfortunately, only two in ten plan sponsors currently offer investment options for steady income at retirement. Furthermore, just 15% of plan sponsors say they feel "a great deal of responsibility" for helping employees secure an income stream in retirement. Nonetheless, interest is clearly growing in retirement income solutions. Of the plans not currently offering a retirement income solution, more than 40% are considering adding one in the future, with a target date fund with an embedded income option the most popular choice, followed by managed payout and in-plan annuities. Guaranteed minimum benefit withdrawal garnered the least interest.
Defined Contribution Plan Survey Methodology
BlackRock's third annual Defined Contribution Plan Survey was conducted online by Boston Research Group during March 2011. Two separate nationwide surveys focused on American workers participating in defined contribution (DC) plans and American corporations sponsoring these plans. The 1,000 employees polled participate in a variety of DC plans, including 401(k) plans, 403(b) plans, profit sharing and stock purchase plans. Participants were drawn randomly across all sized plans and from all sized employers with a maximum sampling error of +/- 2 percentage points at a 95% confidence level. The plan sponsor sample of 119 corporate executives was intentionally designed to represent extremely large plans to capture the opinions of thought-leaders among the plan sponsor universe. All have responsibility for their employer's DC plan, and represent plans with $525 billion in plan assets and 4.1 million plan participants. 60% of the plans represented have more than $1 billion in participant assets.
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