ACCORDING TO DIVERSIFIED Investment Advisors’ recently released study, Report on Retirement Plans – 2007, PPA continues to drive changes to the retirement benefits landscape and strongly influence the decision-making of plan sponsors.  The survey profiled the defined contribution and defined benefit plans of U.S. corporations with 1,000 or more employees. 

Developments already underway as reported in the 2006 edition of the study, such as the shift from defined benefit to defined contribution plans and the increased use of automatic plan features, reflect the response of plan sponsors and their advisors to an increasingly stringent regulatory environment.  These developments remain apparent in the 2007 report, and in some cases, have dramatically accelerated.

Key findings from the survey include:

• 62% of the employers surveyed have implemented automatic enrollment, with an additional 30% reporting that they are currently considering it.  This number is up from the 55% reported in the 2006 survey.

• Twice as many plan sponsors have implemented or are currently implementing automatic deferral increases and automatic deferral rate escalation.

• Marked increase in the number of plan sponsors who have implemented automatic rebalancing and managed accounts.

• Increasing plan sponsor focus on fiduciary responsibilities.

• Defined benefit plan sponsors have more sweeping changes for the year ahead, with 24% expecting to freeze their plans and another 23% expecting to reduce plan benefits.

As you meet with your clients to finalize this year’s action plan, keep in mind that the trend toward greater reliance on automatic services does not decrease the need for employee education.  In fact, it is quite the opposite.  As many employers set a default deferral rate of 3%, few employees are increasing that rate which, although is leading to higher participation rates, is at the cost of lower or inadequate savings.  Consider taking a holistic approach towards helping your clients’ participants save and invest wisely for retirement.  You and your client may want to implement automatic deferral escalation.  This service, combined with automatic enrollment and automatic rebalancing will help ensure that participants not only get on, but stay on the path to retirement readiness.

To learn more about Diversified, call 800-770-6797 or visit their Web site at www.divinvest.com.

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