- Investment choice: 54 percent of participants surveyed would not object to re-enrollment into target date funds from their current investment selection. Plan Sponsors and consultants surveyed in 2012 identified a streamlined investment menu that includes simplified pre-mixed default options as a best practice for DC plans.
- Daily liquidity: While 56 percent of participants said it is important to have daily access to change their investment mix, more than half (51 percent) had not made investment changes for at least 12 months, and 91 percent said they would be willing to sacrifice daily access in exchange for the opportunity to invest in something with greater return potential. This may allow plan sponsors to consider including alternative asset classes in pre-mixed options - enabling access to alternatives as favored by plan sponsors and consultants in the 2012 survey.
- Loan access: 76 percent of participants surveyed had never taken a loan from their 401(k) plan and only 13 percent would consider borrowing from their account. Well over half (56 percent) said loans should only be taken for significant emergency expenses. Plan sponsors consider loans a key risk to retirement savings, but 91 percent of those surveyed in 2012 allowed loans for a variety of reasons due to a belief that such access was needed to drive participation in DC plans.
- Mandatory participation: 21 percent of participants agreed that participation in a DC plan should not be optional, compared to 63 percent of plan sponsors who were in favor of mandatory participation in the 2010 survey. However, participant respondents who were older and closer to retirement were more likely to say participation should not be optional, corroborating the views of plan sponsors.
- 401(k) vs. Rollover IRA: Nearly half (47 percent) left their balances in prior employer plans or rolled into their new employer’s plan when changing jobs. 24 percent rolled their balances into an IRA. While a 401(k) plan provides for institutional oversight, better pricing than retail IRA plans and other benefits, two-thirds of plan sponsors surveyed in 2012 were ambivalent on the issue of encouraging participants to stay in their plan after ending employment with the company, in part for fiduciary liability reasons.
Northern Trust Finds Participants Open To Defined Contribution Plan Design Changes
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