DC to State Plan Switch Very Likely for 30 Percent of Employers
State-run plans slowly are gaining traction. But while those plans may provide a safety net for those whose employers do not offer a retirement plan, their existence does not necessarily portend a stampede of employers dropping their plans in favor of what the state may offer. In a recent survey, less than one-third of employers say they are very likely to drop their defined contribution plan and turn to a state-run retirement savings plan.
The LIMRA Secure Retirement Institute found that 30% of employers
that offer a DC plan say they are very likely to stop offering their plan and instead have their employees enroll in a state plan.
LIMRA found, however, that employers’ interest in state plans varied slightly by the size of the DC plan. Thirty-one percent of those with plans with assets of more than $50 million say they would make the switch, while 22% of those whose plan assets amounted to less than $10 million would.
LIMRA also found that employees highly value aspects of DC plans that are more typically part of employer plans and not state-run plans. They found that:
- 80% of employers say investment variety and education are important, whereas most proposed state-run plans do not offer such aspects;
- 90% of employees value employer contributions, which is not allowed under state-run IRAs; and
- 90% of employees value diverse investments, whereas investment options under state plans are unclear right not.
LIMRA Secure Retirement Institute in 2016 conducted nationwide surveys of more than 1,000 employers offering DC plans and nearly 2,500 workers.