Wondering how your company’s 401(k) plan stacks up against the competition? Well, 401khelpcenter.com has done the heavy lifting for you by analyzing data from a number of different sources to get a general picture of what folks are offering and how this may evolve in the future.
Instant eligibility: Previously, virtually every 401k plan included a waiting period of six months to a year before new hires could sign up and start contributing. However, 401khelpcenter’s research shows that 60 percent of employers now offer new hires “immediate” – defined as one month or less at the company – eligibility to participate in the company’s 401(k). A further 15 percent open it up after three months, 10 percent at six months and 11 percent at one year.
Instant matching: In addition to instant eligibility, the analysis reveals that 40 percent of 401(k)s include immediate vesting for employer contributions, and 23 percent do so for profit-sharing contributions.
Auto-features: The research suggests that employers are increasingly relying on plan features like automatic enrollment and escalation to boost workers’ 401(k) participation and contribution rates. For example, 38 percent of plans have an auto-enrollment feature, with most deferral rates set to 3 percent. As for investment options, 72 percent of plan sponsors have life-cycle or target date funds (TDFs) set as their 401(k)’s default investment option, while a further 13 percent have their default option set to balanced or lifestyle funds.
Matchmaker: Want to know how much you should contribute? The research suggests that the two most common metrics used are a $1 for $1 match of up to a certain percentage of workers’ pay — normally around 6 percent, which is a formula used by 27 percent of companies. The next most popular plan is a $0.50 for $1 match of up to a certain percentage of workers’ pay — normally around 6 percent, which is used by 23 percent of employers.
Does your company’s 401(k) program fall within these parameters? Let us know in the comments!