Auto features paying dividends: report

The findings are based on an analysis of Mercer’s database of 1.2 million DC plan participants, excluding any participants who took a withdrawal or loan from their account during this time period. Deferral statistics refer to participants who made individual deferral decisions and participated in auto-deferral programs.

The study also found that participants who made an account exchange during the same period did slightly worse (5 percentage points) than those who did not — 30% versus 35% respectively.

“Considering the unprecedented market and economic conditions of the past two years, we were interested in seeing how defined contribution plan participants’ account balances have fared based on some key decisions and best practice strategies,” says Dave Tolve, U.S. retirement business leader for Mercer’s outsourcing business. “Based on the results of our analysis, one message is crystal clear: participants who remained focused on their long-term retirement strategy and took positive steps to build their nest eggs regardless of short-term market activity came out ahead, even in the midst of the extreme market volatility.”

Mercer advises plan sponsors to ensure that their plan designs encourage positive saving behaviors by offering tools that automatically rebalance investment portfolios and increase deferral rates.

“Everyone involved in providing or administering defined contribution retirement savings plans knows that the biggest challenge is participant inertia. Once enrolled, participants seldom engage with their plans, and when they do it can sometimes lead to adverse outcomes,” says Tolve. “By adding features like automatic rebalancing and automatic deferral increases, we believe plan sponsors can capitalize on participant inertia to drive more positive retirement savings outcomes.”

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