PLANSPONSOR - December 2018/January 2019 - 10

Survey Says
40th
Anniversary
Of the 401(k)
N
ovember 5, 2018, was the 40th
anniversary of the introduction
of 401(k) plans. We asked
NewsDash readers, " Do you think 401(k)
plans are sufficient for employees to
obtain retirement security? "
Choosing from three possible
responses, just 16.4% of readers said the
plans are sufficient. Nearly half (48.6%)
of readers said the sufficiency of the plans
depends on how employees use them. But
one-third, 35%, said the plans are not sufficient
for obtaining retirement security.
Several of the responding readers
commented that defined benefit (DB)
plans are still needed, with one reader
touting the cash balance plan design.
Others expanded on why they thought " it
depends, " suggesting that plan sponsors
need to also contribute and employees
need to start saving early, or implying that
education about investing is inadequate
or confusing for plan participants.
As always, all verbatim responses
reflect the opinions of individual readers
and not the stance of PLANSPONSOR or
its affiliates at Strategic Insight.
" I am a great believer in 401(k) plans.
My employer contributes up to 15% of salary
plus bonus for each employee. Many of our
employees have a wonderful retirement
because of our plan. "
" 401(k) plans certainly can help
employees prepare for retirement, but they
require levels of discipline and knowledge
that many employees simply lack. Like many
aspects of American life, individuals are
assigned responsibility for tasks that they
lack the time, knowledge, experience and
discipline to successfully complete. "
" For a secure retirement for their
Are 401(k)
plans
sufficient for
employees
to obtain
retirement
security?
48.6%
It depends on
how you use
them
35%
They are not
sufficient
16.4%
They are sufficient
employees, employers should have a defined
benefit plan in addition to a 401(k) in order
for individuals to have a monthly income
at retirement. But, unfortunately, most
employers do not have defined benefit plans,
due to the annual required contributions-
but that is what is needed. "
" A 401(k) account is a usable tool for
capital accumulation, but a well-run and
properly funded DB plan is the answer for
long-term employees. Private and public
employers recently have started moving
toward the DB cash balance plan design,
which utilizes professional investing and
annuitization of the cash balance account
on retirement, resulting in a healthier
balance of risk and reward for both
employers and employees. "
" In my 20-plus years of 401(k) administration,
I have found that it's still difficult
for employees to understand investment
strategies. How do we expect the average
American to make the right decisions? "
" If employees were required to contribute
to a 401(k) plan, just 1%, very early on in
their career, increasing the percentage as
they get older, they should be able to amass
8 PLANSPONSOR.com December 2018-January 2019 Art by Joy Liu
quite a bit of money for retirement. "
" 401(k) plans are a win-win for
employers and employees. The employees
can watch their balance grow over the years
(especially if they start at a young age), and,
as [the accounts] are portable, they can move
to a new employer fairly easily. The employers
are able to budget for their annual costs much
better than for a defined benefit plan. "
" The biggest problem with 401(k)s is that
participation is voluntary. Much of America
lives at or above its means and does not prioritize
saving for retirement over lifestyle. "
And the Editor's Choice goes to the
reader who said: " I answered 'yes' to the
question about could 401(k)s be enough, but
'it [does] depend'-not just on how they are
used, but on what your definition of 'enough'
is. It's a question no one asks about DB
plans, though the same factors apply. Is a
DB plan 'enough' when median tenure has
been something on the order of five years and
10-year cliff vesting applies? Clearly not. "
-Rebecca Moore
You can participate by subscribing to
NewsDash at plansponsor.com/subscribe.

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PLANSPONSOR - December 2018/January 2019

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