A new report reveals that more employees and plan sponsors are seeing increased value in retirement and other benefits.
Results from Sequoia Consulting Group’s 2021 Employee Experience Benchmarking Report (registration required) show that the pandemic had little effect on retirement plan participation and benefits are becoming more competitive, with many tech firms offering immediate eligibility and vesting, as well as boosting their matching contributions.
The survey was completed by finance leaders from 807 companies, mostly in the technology space, located in the tech hubs of California and New York. Data was collected between December 2020 and January 2021, with questions about health care benefits, employee wellbeing, talent programs and retirement programs.
While fewer than half (45%) of the respondents reported that they offer 401(k) matching to employees (up from 36% in 2018), 13% of companies plan to add or increase their match in the next 12 months. In addition, 52% of surveyed companies report that they are considering adding a match or enhancing their existing match to increase plan participation.
“HR professionals continue to cite that job candidates refer to the company 401(k) plan, especially plans that offer matching contributions, as a deciding factor in joining a company,” the report states. For employees starting new jobs, more than half (61%) of these companies offer immediate eligibility, with technology companies far more likely to do so at 64% versus 49%. In addition, companies that allow part-time employees to participate apply the same eligibility requirements as other classifications.
Tech companies also appear to be using immediate vesting as a recruiting tactic, often forgoing the use of longer vesting as a retention strategy. According to the findings, 72% of tech companies have implemented immediate vesting, compared to 67% of non-tech companies.
And while 401(k) participation rates have increased in tech companies, employers continue to experiment with ways to encourage plan participation. For instance, financial education is where 65% of companies plan to focus their efforts within the next 12 months, while 33% plan to invest in other resources. Sequoia notes that some of the most common approaches to inspire engagement are on-demand content through email communications, intranet posts and adding information to onboarding materials.
Not surprisingly, auto-enrollment is another method employers are using to boost participation. According to the study, more than half (56%) of companies utilize auto-enrollment for 401(k) plans, trending up from five years ago, when it was only a third (33%) that did so. The most common election rate for auto-enrollment is 3%, but 40% of respondents reported a default election rate between 5% and 6%.
Adding environmental, social and governance (ESG) funds to an investment lineup is another area that companies are considering. Here, more than a third (37%) of companies have 401(k) plans that include ESG funds, of which 31% added the funds in the past year. Another 6% of companies report that they plan to add ESG funds to their lineup in the next year.
Sequoia’s findings also suggest a trend toward greater value in family-planning options, mental health solutions and additional paid holidays. Among the findings that point to a changing workplace culture:
- 50% growth in the number of companies strategically focused on employee emotional health;
- 44% of companies offer fertility benefits and 9% of companies plan to offer fertility coverage in the next 12 months;
- 33% of companies have “forced vacations” and 20% have annual company shutdowns;
- 70% of companies have rolled out new DEI programming over the last year to create a more inclusive culture;
- 96% of companies plan to expand their talent outreach strategies to build a more equitable workplace; and
- 40% of companies have Employee Resource Groups, which is a 9% increase from last year.
“Each data point is interesting on its own, but a holistic examination of the trends tells a story that companies are being more mindful of how employee experience and flexibility can be successfully integrated into their policies and culture,” notes Michele Floriani, Chief Marketing Officer at Sequoia. “Clients are telling us, as they come out of the most challenging year in a generation, that changes initially brought on by temporary necessity now make for good permanent solutions.”