State and Local Plans Should Augment Voluntary Enrollment, Analysis Suggests

Voluntary enrollment in defined contribution plans offered by state and local governments is only part of the equation in boosting retirement readiness, and more steps to boost participation are needed, says a recent analysis.
 

In a recent blog post, “Driving Plan Participation and Engagement in the Government Market,” Voya Financial argues that it’s going to take more to build participation in retirement plans than to simply rely on employees to enroll voluntarily. “Voluntary enrollment is not significantly improving participation rates,” they write.

Voya cites U.S. Bureau of Labor Statistics data from March 2017 on retirement benefits, access, participation and take-up rates that show that participation in defined contribution plans at that time was 48% among all full-time workers (both government and private), 54% in the private sector, and 18% among state and local government employees.
 

How can state and local governments boost that 18% number? Voya argues that “plan design is a critical factor” in helping to improve employees’ retirement readiness, and suggests a variety of strategies that may help boost participation and readiness.
 

Auto enrollment and auto escalation “can significantly help improve participation and savings rates,” says Voya; however, it notes that there can be impediments to such a plan feature. For instance, Voya Senior Vice President Amy Heyel, their National Practice Leader for Government Markets, observes that the availability of such features can be low, particularly for public sector employees: She notes that just 11 states allow the implementation of automatic plan features.
 

Thoughtful outreach to new employees and eligible employees who are not participating can help boost participation, Voya suggests, particularly when automatic features are not available.
 

“Traditional efforts from the retirement service provider industry and plan sponsors will continue to see moderate success from marketing, communication and education,” argues Voya, but they argue that more is needed. “Unless we push forward with more holistic solutions, we will be challenged to move the dial significantly on metrics such as enrollment, savings rate, diversification and overall plan health,” they assert.