Cyber

Keeping Up? 401k Trends

01.10.2022

 

Employers are increasingly using both automatic enrollment and automatic escalation to encourage retirement savings. Increased retirement savings is critical as life spans—and the cost of living—rise, and both employers and employees are seeing the benefit of making the effort to save automatically.

 

Good for People—And Business

With almost half of Americans worried that their retirement savings are not on track, well-designed 401k plans are a hugely appealing employment benefit. In addition to making it relatively easy for workers to automatically set aside savings on a routine basis, employer-sponsored retirement plans turn out to be good for business too. As CNBC reports: Financial security may mean greater productivity at work; it may also mean earlier retirements, which could equate to employer savings on health-care benefits, for example, which generally becomes costlier with older age.

 

Data shows that the increased use of both auto-enrollment and auto-escalation of savings in 401k plans is making a difference in retirement saving, especially as the deferral rate commonly set by employers has risen from 3% to 6%. However, there’s still plenty of room for improvement with finance experts recommending that 15% of gross salary each year—including an employer match—be saved for retirement.  CNBC highlights these promising trends related to automating 401k savings options:

 

About 62% of businesses with a 401(k) plan used automatic enrollment in 2020, up from 60% the year prior and 46% a decade ago, according to the Plan Sponsor Council of America…This feature lets an employer divert a portion of workers’ paychecks into a 401(k)… if that worker hasn’t signed up voluntarily…Workers receive a paper or digital notification ahead of time and can opt out — but most do not. Vanguard Group, one of the largest 401(k) providers, found that 92% of new hires were still saving in the 401(k) plan three years after being automatically enrolled; in plans with voluntary enrollment, just 29% were still saving.

 

Companies are also beefing up the automated savings rate for workers, in a bid to help them build a bigger nest egg. Last year marked the first time more employers used a 6% “deferral” rate rather than 3%, which had been most common. (This is the share of a worker’s paycheck that is saved automatically.)A third of businesses with a 401(k) plan chose 6% in 2020, while 29% used that lower rate…Nearly 79% percent of plans with auto-enrollment also use “automatic escalation,” a feature that gradually raises a worker’s savings rate over time, generally once a year and up to a maximum rate.

 

More Automation Possibilities?

With so many regulations and compliance issues to keep track of, plan sponsors across the country are choosing the efficiency of Colonial Surety’s multi-year packages to ensure that their fundamental coverages remain current. Given that failure to have adequate and up-to-date ERISA bond coverage at all times is among the most common compliance issues plaguing retirement plan sponsors, multi-year plans are the ideal solution. Experts caution that insufficient, or expired ERISA bonds are a trigger for Department of Labor (DOL) audits. The National Association of Retirement Plan Advisors (NAPA) reminds us:  “Plan fiduciaries can be held personally liable for losses that should have been covered by a fidelity bond.”  Why put your life savings at risk? At Colonial, plan sponsors can opt for cost-saving multi-year coverage, ensuring the ERISA bond remains Department of Labor compliant for the life of its term.

 

Uniquely, Colonial includes retroactive ERISA fidelity bond coverage for years when the plan was not adequately covered—and also offers affordable packages that include both Fiduciary Liability and Cyber Liability insurance.  Summing up: choose a multi-year package from Colonial and receive: the required ERISA bond to protect the assets of the retirement plan from theft; Fiduciary Liability coverage to protect you and your assets from personal liability; and, Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.

 

In additional to reasonable pricing, Colonial locks in multi-year rates and even offers installation payments. Proceed with confidence: Choose Your Complete Plan Sponsor Package Now

 

 

Risky Business?

With ERISA litigation hot, the tough reality for retirement plan sponsors is that despite diligence, allegations of fiduciary breaches are now considered a “new normal.” Defense is costly: litigation eats up time and ERISA legal experts cost upwards of $600—per hour. That’s why plan sponsors across the country are being proactive and obtaining Colonial Surety’s affordable Fiduciary Liability Insurance. With annual premiums of less than just one hour with an ERISA lawyer if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be covered for defense costs and penalty limits up to $1,000,000 in the event of a lawsuit. Uniquely, Colonial even includes Cyber Liability Insurance, locks in multi-year rates and offers installation payments. Get protected efficiently and affordable here now: Fiduciary Liability Insurance–with Cyber Included!.

 

 

Serving customers since 1930, Colonial Surety is the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.

 

Colonial Surety Company is rated “A Excellent” by A.M. Best Company, US Treasury listed and in business all across the country.