Commissioned by Great-West Life, the 2013 Capital Accumulation Plan (CAP) Benchmark Report combines benchmark data with strategies to help employers position more employees to reach their retirement goals.
WINNIPEG, March 31, 2014 /CNW/ - The 2013 Capital Accumulation Plan (CAP) Benchmark Report, entitled Understanding results to create desired outcomes, has found participation rates for eligible employees in voluntary defined contribution (DC) plans to be 81 per cent, and 61 per cent for voluntary group registered retirement savings plans (RRSPs).
"While these figures are healthy, when 20 per cent to 40 per cent of eligible employees are not participating in their voluntary workplace pension plans, we can see there is room for improvement," says Jeff Aarssen, Senior Vice-President of Group Retirement Services for Great-West Life. He suggests employers consider implementing mandatory enrolment as one strategy to increase employee participation.
"We know some sponsors shy away from mandatory enrolment because of the perceived increase in employer contributions associated with greater enrolment numbers," Aarssen says. "Where cost is a concern, sponsors can adjust the matching formula to a lower amount, to offset higher participation rates. The formula can always be re-adjusted upward in the future, as resources allow."
"Without mandatory enrolment, many employees may be at risk because they haven't taken the first step to become members of the plan," adds Ken Millard, Vice-President of National Accounts for Great-West Life. "This reluctance could be related to loss aversion, which refers to peoples' tendency to place greater value on avoiding losses than on making gains," Millard explains. To overcome this natural tendency, he encourages sponsors to re-frame company matching contributions as being akin to an enhanced compound growth rate. "If a sponsor matches 25 cents for every dollar a member contributes, that could be seen as an automatic 25 per cent rate of return," Millard says. "That's a strong message to share with members who are loss-averse."
The CAP Benchmark Report advocates for these and other plan design strategies and education techniques that contribute to a successful group retirement plan, explored in the sections on early enrolment, meaningful contributions, appropriate investment choices and the impact of withdrawals. The 2013 report is based on a survey of nearly 400 organizations offering a defined contribution (DC) or group registered retirement savings plan (group RRSP) to see what was working well and to identify critical areas for improvement and growth going forward.
Managed by Rogers Publishing Ltd., the 2013 CAP Benchmark Report summarizes the results of updating plan sponsor profiles in the Canadian Institutional Investment Network, as well as the findings from an online survey. The report represents an unbiased view of Canadian group retirement market trends.
Data was collected between February 1 and August 1, 2013 from 392 organizations offering a Defined Contribution (DC) plan or a group RRSP to their employees. In total, 335 respondents have a DC plan and 288 have a group RRSP. Results depend on the specific organizations that complete the survey, which vary from year to year.
About Great-West Life
Great-West Life is a leading provider of capital accumulation plans in Canada, administering more than 17,500* group retirement plans and over 1.3 million* members accounts. In the United States, Great-West Financial is the fourth-largest group retirement plan record keeper based on total participants, and Putnam Investments adds to the organization's North American presence in this market.
* As at Dec. 31, 2013
Video with caption: "Video: Ken Millard, Vice-President of National Accounts for Great-West Life, speaks about Encouraging early enrolment.". Video available at: http://stream1.newswire.ca/cgi-bin/playback.cgi?file=20140324_C6848_VIDEO_EN_38284.mp4&posterurl=http://photos.newswire.ca/images/20140324_C6848_PHOTO_EN_38284.jpg&clientName=Great%2DWest%20Life%20Assurance%20Company&caption=Video%3A%20Ken%20Millard%2C%20Vice%2DPresident%20of%20National%20Accounts%20for%20Great%2DWest%20Life%2C%20speaks%20about%20Encouraging%20early%20enrolment%2E&title=GREAT%2DWEST%20LIFE%20ASSURANCE%20COMPANY%20%2D%20Employee%20participation%20in%20employer%2Dsponsored%20retirement%20savings%20plans%20continues%20to%20be%20healthy%2C%20with%20room%20for%20improvement&headline=Employee%20participation%20in%20employer%2Dsponsored%20retirement%20savings%20plans%20continues%20to%20be%20healthy%2C%20with%20room%20for%20improvement
SOURCE: Great-West Life Assurance Company
For further information:
Marlene Klassen, APR
Assistant Vice-President, Communication Services