The percentage of all workers participating in employment-based retirement plans was 41.5 percent in 2007, up from 39.7 percent a year earlier, according to a study by the Employee Benefit Research Institute.

Among full-time workers 21 to 64 years old, 55.3 percent were in an employment-based plan in 2007, up from 52.7 percent the previous year, according to a news release on the study issued by EBRI in Washington.

Other findings in the study were:

• 63.9 percent of workers 55 to 64 were in a retirement plan in 2007, compared with 28 percent of workers ages 21 to 24.

• 57 percent of full-time female workers participated in a plan in 2007, compared with 54 percent of male workers.

• Florida had the lowest representation of workers participating in plans in 2007, at 42 percent. Wisconsin had the highest participation rate, at 68 percent.

The study is available on EBRI’s Web site, www.ebri.org.

Automatic enrollment was supposed to be the magic pill to help employers painlessly increase participation rates in their 401(k) plans. And while that may prove to be the case over the long term, one thing is becoming quite clear right now: Automatic enrollment doesn’t mean automatic results.

Despite the best efforts of many plan sponsors, participation rates in a survey of more than 400 corporate plan sponsors remained basically the same over the past two years—on average, 76 percent of employees now participate in their company’s 401(k) plan, according to a new study by Deloitte Consulting.

That’s just a slight uptick from Deloitte’s 2006 survey, which found that three-quarters of workers were enrolled in their employers’ 401(k) plans.

The marginal increase in participation rates, oddly, occurred during a time in which the number of companies automatically enrolling workers in 401(k) plans nearly doubled. About 42 percent of the plan sponsors polled by Deloitte have an automatic-enrollment feature now, compared with 23 percent two years ago.

There may be a simple explanation, however, for these seemingly contradictory results. The vast majority—roughly 66 percent—of companies that automatically enroll their workers in 401(k) plans are doing so only for new hires.

Less than a third of companies enroll their entire workforce when they add the auto-enroll feature.

Source: Mark Bruno of Financial Week.

Reprinted from workforce.com posting, July 2, 2008.

For the scores of large companies fighting to increase participation rates in their 401(k) plans, there’s new information that certainly won’t help their cause: Even those workers contributing a decent amount of money to their company-sponsored plans aren’t likely to meet their income needs for retirement.

In fact, the vast majority of workers—roughly 80 percent—at large corporations will not be able to stash enough cash to adequately support themselves during retirement, according to a new study from benefits consulting firm Hewitt Associates.

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Almost daily, news stories appear regarding the U.S. Social Security crisis and an aging population.  When is Social Security going to run out of money?  How will we fund benefits for baby boomers?  Will older workers continue to work beyond “typical” retirement?

Apparently we’re not alone in dealing with these issues.  According to a BBC news article, France has similar challenges.  Its population is aging and the government is responding with a number of measures to address it including:  threatening to penalize companies who don’t increase the number of their employees who are 55-64 years old and requiring that employees work 41 (not 40) years to qualify for a full state pension.  France has a very high life expectancy, but few older workers.  Only 38.3% of French 55-64 year olds work, compared with 70% in Sweden, 57% in the UK, and 52% in Germany.   Changes in pension benefits are not popular with workers.  Talk of strikes is already taking place.

The percentage of participants in 401(k) programs who have taken a loan from their investments rose from 9 percent in 2005 to 18 percent in 2007. This trend of increased borrowing took place during relatively good economic times of high employment and low mortgage foreclosures.  The outlook is for the borrowing rate to increase during tougher economic times.

The good news about borrowing from a 401(k) plan is that you are essentially borrowing and paying back yourself at an interest rate that is much less than a credit card cash advance. Repayment is made by automatic deductions from earnings. So what’s the problem? Simple, when you reduce the balance of a retirement account you reduce the earning power of these funds.

Employer-sponsored plans are able to encourage more people to save but less than 50 percent of the workforce, ages 25-64, has any kind of defined benefit or defined contribution plan.

Of those who are eligible to participate in a defined contribution plan, 89 percent do not contribute the maximum, 20 percent to 25 percent do not contribute at all and 45 percent do not roll the investment over when they change jobs.

Only 49 percent of employees participate in 401 (k) plans without automatic enrollment compared to 86 percent of those who are enrolled automatically.

Participants also tend not to increase the amount of their default contributions. A full 61 percent do not increase the amount over time.

Source: Workforce Management (www.workforce.com)

A fringe HR / benefit management topic that I pay close attention to is retirement savings. Even for today’s veteran workforce, retirement savings plans are an important but underutilized employer benefit. It is no wonder that when I read a recent article on this topic posted on cnn.com that I sat there staring at my computer screen and shaking my head(http://www.cnn.com/2007/LIVING/worklife/12/12/law.teens.retirement.ap/index.html). The jist of the article was that by the time today’s teenage workers are ready to retire, well over a third will have saved ZERO, NADA, ZILCH to augment their less than adequate government social security income.Let me emphasize this point by repeating it. The report found that more than one out of every three American workers born in 1990 will have zero dollars in a 401(k) or other similar style retirement savings plan!Thinking about it a bit further I said to myself, “Well, this is no reason for alarm. Who would expect a teenage kid to be squirreling away some of their minimum wage earnings for retirement? They have 45 years to save.” But then I read on and better understood the alarming point of the article. The data supporting this prediction comes from the U.S. Government Accountability Office and is based on current and historical trends of workforce retirement savings rates and employer savings plan offerings.

The GAO report estimated 36.8 percent of today’s 17-year-olds will have no money in a 401(k) or similar plan when they retire. The numbers will be worse for low-income workers: 63 percent of them will have zero dollars in a 401(k)-type account when it comes time for them to retire.

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