A December 2021 PNC Survey[1] focusing on Institutional Social Responsibility found that 99% of C-Suite and financial executives of both for-profit and nonprofit organizations are committed to helping employees save for retirement and 84% believe they have made significant progress toward achieving their organization’s diversity, equity, and inclusion (DEI) goals.

Despite these commitments, many employees remain underprepared for retirement. Specifically, low-income workers, women, and people of color tend to have significantly less access to retirement plans and when these groups do have access, they accumulate less retirement plan assets[1] relative to other demographics. Thus, building a more equitable retirement program is essential to causing positive changes in retirement outcomes for employees and helping organizations achieve goals related to DEI.

In this paper, we will discuss the current retirement landscape and offer three primary methods for addressing these disparities: expanding automatic plan design features, employing creative matching contribution formulas, and enacting innovative education strategies.

Current Retirement Landscape

Workplace retirement savings vehicles, such as defined contribution (DC) plans, are one of the most common ways that American workers save for retirement. DC plan programs in the United States totaled $11 trillion in assets as of Q4 2021[2], and provide over 80 million participants with a tax-deferred retirement vehicle[3]. With the number of defined benefit plans (pensions) continuing to decrease and social security facing numerous headwinds related to both funding and its ability to provide sufficient income to retirees, we expect the importance of defined contribution plans to increase with regard to improving retirement outcomes.

Yet statistics show that DC plans are not benefitting all demographic groups equally. Income level is the first determinant of retirement readiness we will explore. The data in Chart 1 illustrates that employees in lower wage groups struggle across the board, with lower access to, participation in, and take-up rates for defined contribution plans.

Chart 1: Defined Contribution Plan Access, Participation, and Take-Up Rate by Wage Percentile

Source: https://www.bls.gov/ncs/ebs/benefits/2021/employee- benefits-in-the-united-states-march-2021.pdf

View accessible version of this chart.

In terms of gender, a 2020 study from the National Institute on Retirement Security[4] found that slightly more women work for an employer that offers a retirement plan (69% to 65%), but slightly more men are eligible to participate in a plan (89% to 85%) and take up that offer (81% to 79%), leading to an equal standing in terms of men and women who participate in a plan (47%). However, there is a significant difference between the genders relative to income during retirement, with a median household income for women aged 65 and older of $47,244, or 83% of the median household income for men of the same age ($57,144).

This retirement wealth gap can likely be explained in large part by a gender pay gap as well as employment gaps (for reasons including pregnancy, childcare, and caregiving for elders or spouses), worse financial outcomes from divorce, and other issues which may impact a woman’s ability to save for retirement.

These numbers are even worse across race and ethnicity lines. Table 1 shares data from the Federal Reserve Bank highlighting lower levels of access, participation, and average balances for households of color. The average account balance statistic in the table is perhaps the most alarming disparity.

While plan sponsors strive to design their plans to improve retirement outcomes, these statistics demonstrate that there is significant room for improvement. To address this, we offer three strategies for consideration.

Expanding Automatic Plan Design Features

The concept of automatic enrollment is not a new phenomenon, but rather a tried-and-true method to increase retirement assets. Automatic enrollment typically causes new employees of a company to start contributing automatically in the company’s defined contribution plan at a pre-set deferral rate. The contributions are invested in the plan's qualified default investment alternative (typically a target- date fund) until the employees re-direct their investments.

Many employees who are enrolled in a plan via an automatic enrollment feature tend to remain enrolled, and to remain enrolled at the deferral rate set by the plan's automatic enrollment feature. This default enrollment helps to overcome two primary challenges to retirement savings, lack of knowledge and inertia:

  • Knowledge entails the variety of lifetime experiences and education (formal and informal) that leads an employee to employment with a particular company. While some individuals benefit from a background in which financial literacy was prominent, many do not. For example, low- to-moderate income communities are less likely to know or be solicited by financial advisors, due in no small part to a perceived lack of match between expected need (by the community) and expected opportunity (by financial advisors). This may reduce the likelihood that individuals from such communities will be familiar with or prioritize retirement savings vehicles.

Table 1
Household Retirement Plan Access, Participation, and Take-Up Rate by Race and Ethnicity


Households with access to retirement plans

Households participating in retirement plans

Household take-up rate

Average household retirement account balance





















*Defined as “a diverse group that includes those identifying as Asian, American Indian, Alaska Native, Native Hawaiian, Pacific Islander, other race, and all respondents reporting more than one racial identification.”
Source: Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances, Federal Reserve Bank (September 28, 2020)

  • Inertia is a broad category and while we acknowledge other similar situations exist, we will focus here on two major types. One common cause of inertia is that employees, due to personal financial reasons (budget constraints, debt, etc.) perceive themselves as unable to set aside money for retirement. Another common scenario is that employees simply do not take the time to set up their retirement plan. Whether as a result of setting it aside as “something to get to later,” or otherwise, these employees delay enrolling in the retirement plan. What starts as “I’ll get to it tomorrow, next week, well definitely next month” can result in months, years, or even a full lifetime of never starting to save for retirement.

While automatic enrollment is unable to affect access, it can help to cause an increase in participation among eligible employees. As illustrated in a 2021 retirement security survey, in which 84% of workers cited the feature as a primary reason for earlier saving, automatic enrollment has proven to cause increased participation[5]. This statistic tracks with the significant increase in plan sponsor adoption over the past decade. The Plan Sponsor Council of America found that automatic enrollment has increased from being a feature in 45.9% of plans in 2011 to 62% of plans in 2020[6]. Given its proven ability to help employees overcome knowledge and time- related barriers, we expect this trend to continue in the coming years.

For plan sponsors looking to add or augment an automatic enrollment feature, we would suggest these additional considerations to help maximize the impact:

  1. Setting the default automatic enrollment deferral rate to a higher starting number. In our opinion, the higher the default deferral percentage, the more likely automatic enrollment will improve employee retirement outcomes. Table 2 shares the default deferral percentages for plans with automatic enrollment, with the most often used now being 6%.
  2. Adding automatic escalation, whereby the employee contribution amount is increased up to a pre-specified amount (in percentage increments per year) unless the employee opts out.
  3. Conducting automatic re-enrollment, whereby each year employees need to re-opt out of enrollment in the defined contribution plan.
  4.  Examining the applicability of the qualified default investment alternative (QDIA) to all employees, and if it will help to cause retirement readiness for employees that do not otherwise change their investment selection.

Implicit in all of this is the idea that it is easier to convince an employee to not opt-out (i.e., take no action) than it is to convince an employee to opt-in (i.e., require action). By making it the easiest course of action for an employee to participate (through automatic enrollment), it is likely that more employees will remain enrolled in the plan relative to the number of employees that would take action to enroll if they were instead required to opt-in (through personal action).

Table 2
Default Deferral Percentage in Plans with Automatic Enrollment









% of Plans








Source: Plan Sponsor Council of America’s 64th Annual Survey of Profit Sharing and 401(k) Plans (2021)

Employing Creative Matching Contribution Formulas

A primary incentive for participation in defined contribution plans is an employer matching contribution. Put simply, employer matching contributions feel like “free money” to participants. Despite this, two key challenges have emerged. First, different studies over the years have estimated billions of dollars in available “matching” that is unrealized by eligible employees. Second, for low-to- moderate income employees, a matching contribution made as a fixed percentage of the employee’s salary might not be significant in dollar terms with respect to improving the employee’s retirement outcome[7].

With this in mind, there are two key strategies that we have seen improve retirement outcomes: minimum employer contribution levels and stretch-matching.

Minimum Contribution Levels

As the name implies, minimum contribution levels are dollar thresholds set to describe a minimum amount that an employer will contribute to an employee’s account, often only if the employee takes set actions related to their own contributions. An example might be, “Employer will contribute the greater of 100% on the first 4% of an employee’s deferrals or $1000.” In this case, if the employee defers 4% of compensation to the defined contribution plan and that amount is less than $1,000, the employer typically makes a “true-up” at the end of the year to bring the employer match in dollar terms to $1,000. Done in this way, the minimum employer contribution would never be less than $1,000 per employee[8].

As an example, PNC will contribute a minimum of $2,000 in matching contributions each year if an employee contributes at least 4% of their eligible compensation every pay period during the year and is employed by PNC on the last business day of that year. This minimum match helps ensure that eligible employees earning less than $50,000 annually get an extra boost to their retirement savings[9].

Minimum contribution levels can help to improve retirement outcomes by providing additional financial support to help increase potential retirement income for employees with lower pay. It is important to note this method is not without cost (e.g., the amount of the minimum contribution per employee relative to what the match would have been otherwise). With that in mind, provisions that encourage positive employee behavior (such as PNC’s requirement that employees contribute at least 4% to receive the minimum match) can help to increase the impact of this additional cost to employers.

Stretch Matching

The second option focuses on encouraging the employee to contribute more. Often, to simply maximize the incentive benefit, participants will only defer up-to the maximum match rate – for example, electing a deferral rate of 4% with an employer match formula of 100% on the first 4% of contributions.

In behavioral finance terms, this is akin to anchoring bias, whereas the first number they see (e.g., employer match formula of 100% on the first 4% of contributions) becomes an arbitrary benchmark.

Employees assign meaning to the 4% number, often associating it as “enough for them to achieve retirement readiness.”

To combat this bias, stretch-matching requires the employee to contribute above the maximum employer match rate to receive the full match. As an example, consider reengineering a formula of matching 100% on the first 4% of contributions to matching 50% on the first 8% of contributions. In this scenario, the employee’s “anchor” is set at an 8% contribution rate, encouraging higher net contributions without the employer having to change the dollar cost of the employer match.

It is important to note that this method is not infallible – for example, lower-income employees might be unable or unwilling to contribute a higher percentage (e.g., above 4%), thus leaving employer match on the table and potentially reducing aggregate (employee & employer) contribution rates in dollar terms. In this way, a stretch match might actually hurt lower-income employees rather than help. It is important to monitor participant behavior closely and adjust as needed following any changes to a plan’s matching formula.

Enacting Innovative Education Strategies

Automatic features, matching strategies, and other plan design changes can only go so far in driving participation in the plan. Employees must be aware of why and how they should participate in their defined contribution plan and be given the tools to become financially able to do so. Comprehensive financial education and enhanced employee communications are a crucial part of driving positive retirement outcomes.

Comprehensive Financial Education

Good financial education starts with data. Quantitative plan data can help to identify if certain groups are un/under engaged in the plan (e.g., not participating, low balances, low deferral rate, not receiving full match). Employee surveys can help to bolster quantitative data with qualitative feedback from employees. This can help in designing targeted education strategies to cause the greatest impact, based on both data and direct employee response.

Once you have the data, employers can work with financial providers to customize holistic financial wellness programs for their workforce. This can range from on-site education sessions (where an educator visits an office, factory, etc.) and live/on- demand webinars to points-based learning portals that incentivize employee participation and more.

The internet is filled with jokes regarding what we learned in school as children at the expense of basic financial concepts. “Square dancing” is a particular concept frequently picked on. Financial education strategies provide tools that help employees make up for lost learning opportunities and help to build the knowledge capable of driving financial wellness and retirement readiness. The previously mentioned PNC Survey of C-Suite and financial executives found that while only 57% of employers currently offer financial education today, an additional 29% are in the planning process to offer it in the future. We expect this trend to continue in the coming years.

Enhanced Employee Communications

The best education strategy does nothing if it never reaches employees. Communication is perhaps the most important part of employee education in this respect. There are a couple of key criteria to an effective communication strategy:

  • Various media at various times – individual employees respond to communication sources differently. Some prefer articles to read, some prefer live classes, some prefer on-demand videos, and some prefer other resources. To the extent practicable, an effective communication strategy includes as many different sources of information as possible so that employees can pick what works best for them.
  • Clear and concise – financial and retirement topics can be complicated and industry jargon can be confusing. Education should be simple and utilize clear and concise language. The easier the information can be understood, the more effective the education strategies are likely to be.
  • Accessible - employee communications, educational materials, websites, and videos must be designed for use by your entire workforce, including employees with varying accessibility or non-English language needs. It is important to consider whether the employee education provider offers training with features that are ADA compliant, include closed captioning, and more.
  • Inclusive language – acknowledging diversity conveys respect to all people. When plan sponsors regularly use inclusive language in their vernacular, including retirement documents and communications, they can help employees to feel heard and understood, potentially increasing the participant engagement. As more organizations increase their focus on diversity, equity, and inclusion in hiring, retention, training and beyond, ensuring employee benefit communications reflect this priority may be critical.

Returning to the PNC Survey mentioned above, slightly over half of respondents (55%) say that less than 50% of their employees take advantage of financial wellness programs. Through an approach that starts with data, customizes the experience based on employee demographics and requests, and effectively communicates the resulting education program, employers can meet employees where they are and increase employee engagement. This, perhaps more than anything else, has the greatest potential to improve employee financial wellness and retirement outcomes, in our opinion.


Employers acknowledge that they feel responsible for helping employees to achieve financial wellness and retirement readiness. Beyond oft-cited statistics on productivity or other business metrics that the lack of financial wellness can cause, employers are starting to see it as a pillar of an institutional social responsibility strategy. Implicit in this is the notion that companies can do well by doing good, especially by employees that might need it the most. With time and continued effort, we hope this will result in more equitable retirement outcomes for all.

For more information or to ask about a free defined contribution plan review, please reach out to your PNC Representative.


Accessible Version of Charts

Chart 1: Defined Contribution Plan Access, Participation, and Take-Up Rate by Wage Percentile
Percent Access Participation Take-Up Rate
Lowest 10% 31% 14% 44%
Lowest 25% 41% 21% 52%
25-50% 64% 43% 68%
50-75% 70% 53% 75%
Highest 25% 75% 61% 81%
Highest 10% 81% 68% 84%