Recently, BLR conducted a survey of 1,261 HR professionals to find out about the retirement benefits their organizations offer employees. Most respondents (86%) say they offer either a 401(k) or 403(b) retirement savings plan to employees.
Employee contributions 
While a high number of employers represented in the BLR survey offer retirement benefits, only 33% automatically enroll employees in those programs. When the employee enrollment in defined contribution plans is automatic, the amount initially contributed is:
- Less than 3% of employee earnings for 27% of survey participants;
- 3% of employee earnings for 43% of survey participants;
- 4% of employee earnings for 12% of survey participants;
- 5% of employee earnings for 7% of survey participants;
- 6% of employee earnings for 6% of survey participants; and
- More than 6% of employee earnings for 6% of survey participants.
The number of employees that voluntarily participate in their 401(k) or 403(b) plans varied widely among survey participants:
- 26% of the HR professionals responding to our survey said that less than 30% of their organization’s employees participate voluntarily;
- 35% of responders said 31% to 70% participate voluntarily; and
- 39% said more than 70% participate voluntarily.
When beginning voluntary contributions to 401(k) or 403(b) plans:
- 25% of the HR professionals surveyed said that employees contribute less than 3% of their base salary;
- 30% said employees begin contributions at 3%; and
- 16% have employees who begin voluntary contributions at 4% of their base salary.
The practice of employees adding the “cash-out” for their unused vacation or sick time to their 401(k) or 403(b) plans is permitted by 5% of employers and 3% are considering whether to allow it.
The maximum amount an employee may contribute annually to their 401(k) or 403(b) plan for 93% of employers is the highest amount allowed by the IRS, which is $17,500 for 2013.
Employer contributions
Though 18% have never provided an employer match, the majority (59%) of the employers responding to our survey that offer a 401(k) or 403(b) plan to their employees also provide a matching contribution. In recent years, 10% temporarily stopped their employer match, but 13% maintained their matching contributions throughout the recession.
The level of employers’ matching contributions among the survey respondents is:
- Up to 3% of employee earnings for 17% of employers.
- Up to 5% for 13%;
- 6% for 25% of employers;
- Up to 10% for 2% of employers; and
- More than 10% for 4% of employers.
Matching employee contributions dollar-for-dollar is the practice for 38% of employers. A match rate of 75¢ to the dollar is the norm for 2%, 50¢ on the dollar is provided by 31%, and 25¢ per dollar of employee contribution is standard for 12% of employers.
The requirement for vesting of employer contribution is:
- Less than a year of service for 21% of employers;
- 1 year is required by 18%;
- 2 years is the rule for 6%;
- 3 years is required by 11%;
- 4 years is the vesting level for 4% of employers;
- 5 years of service for 27% of employers; and
- More than 5 years of service for 13%.
Plan features
More than 15 investment options are offered by 48% of employers and 11-15 options are offered by 28%. Another 16% offer 6-10 investment options and 8% of employers in our survey offer 1-5 options.
Target Date/Life Cycle funds are available for 64% of survey participants. The in-plan Roth conversion, a feature made available by the Small Business Jobs Act of 2010, is available for 25% and 4% are planning to add the feature.
Other retirement benefits offered by our survey participants include:
- Defined benefit plans (23%);
- Roth 401(k) (30%);
- 457 plan (11%);
- Profit sharing (21%);
- Stock options (4%);
- Employee stock ownership plan (6%);
- Union-sponsored pension plan (3%); and/or
- SIMPLE or SEP (27%).
Retirement benefits in 2013 are about the same as 2012 for 85% of survey participants and more generous for 6%. It’s been 4 years or more since 29% of our survey participants conducted a comprehensive review of their retirement benefits package. A thorough review was conducted in 2012, however, by 46% and in 2011 by 15%.
Benefits planning and administration
When it comes to determining which retirement benefits to offer, 38% work with a consultant to create their plans and 31% evaluate the benefits offered by other companies and their competitors. An employee survey to find out what they have an interest in is conducted by 9% and 44% are guided by the cost to the company.
Retirement benefits are managed in-house by 14% of those who responded to this question in our survey. Some of the administration of benefits is outsourced by 44% and all administration is outsourced by 42%.
Our survey shows that 11% plan to add or make changes to their retirement benefits package in 2014, 61% of employers have no additions or changes planned, and 27% are not certain at this point in time.
For those who are planning to add or make changes to their retirement benefits, 26% are planning to add a defined contribution plan such as a 401(k), 403(b), or Roth 401(k) and 23% are planning to increase their employer match to their existing defined contribution plan, while 4% are planning to reduce the level of their employer match. An increase in the length of service required for vesting of employer contributions is planned for 5% and 4% plan to reduce their length of service requirement. Cleaning up the language of their plan documents is on tap for 26% and 16% plan to change how plan documents are distributed. Their current defined contribution plans will be eliminated for 3%.
The addition of a defined benefit plan is planned for 5% of our survey participants and 9% expect to increase the employer contribution to their existing plan. For 10%, however, a reduction in the employer contribution to their defined benefit plan is expected and for 4% their defined benefit plan will be eliminated altogether.
It’s an even split when it comes to whether employers offer financial planning assistance to their employees with 48% offering such assistance and 48% not providing this service to employees. The remaining 4% aren’t sure whether this benefit is offered.
Early retirement is an option for the employees of 16% of our survey participants. It is not offered by 78%, though, and 6% aren’t sure. Of those that do offer early retirement, 19% ask those employees to sign a waiver/release of claims against the company. Surprisingly, 55% do not make a waiver/release a requirement and 27% are not sure.
Survey participants
Organizations with up to 250 employees account for 62% of our survey participants and 20% have 251 to 1,000 employees. Another 13% employ 1,001 to 10,000 individuals and 5% of survey respondents work in organizations with more than 10,000 employees.
Of the participants responding to our survey, 42% have a workforce with 20% or less exempt employees. Another 33% have a workforce that is 21-50% exempt and 26% have a workforce with more than 50% exempt employees. Unions represent employees at 20% of our survey participant employers.
The positions held by our 1,261 survey participants include HR Coordinator (5%), HR Generalist (9%), HR Specialist (4%), HR Manager (29%), HR Director (21%), HR VP or above (10%), and other area with HR responsibilities (22%).