Changes in 401(k) plan designs helps engage employees

Employers that have changed their 401(k) plan designs have done so in large part to increase the likelihood their employees save enough for retirement.

“With a defined benefit plan, everyone was covered and accruing a benefit. With defined contribution plans, employers have to take steps to make sure that employees are earning benefits,” said Rob Austin, director of retirement research in Aon Hewitt's Charlotte, North Carolina office.

Design changes made by 400 employers participating in a 2013 Aon Hewitt study, 90% of which offer 401(k) plans covering about 10 million employees, include:

• 76% allow employees to immediately participate in 401(k) plans, up from 55% in 2003.

• 53% offer immediate eligibility for a company matching contribution to a 401(k) plan, up from 31% in 2001.

• 19% of employers match 100% of employees' 401(k) contributions up to 6% of pay, up from 4% in 2001.

• 59% of employers automatically enroll employees in the company's 401(k) plan, up from 14% in 2001.

Automatic enrollment surged following a 2006 law and subsequent Internal Revenue Service guidance that clarified that employers can automatically enroll employees in a 401(k) plan unless the employee specifically objects.