Practical analysis for investment professionals
28 June 2022

DC 2.0: Three Paths to More Equitable Retirement Programs

Among C-suite and financial executives at both for-profit and nonprofit organizations, 99% 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. That’s according to a December 2021 PNC Survey on institutional social responsibility.

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 fewer retirement plan assets relative to other demographics. Thus, building a more equitable retirement program is essential to creating better retirement outcomes for employees and helping organizations achieve DEI-related goals.

So, what does the current retirement landscape look like and how can we address these disparities? We propose three primary methods: automatic plan design features, creative matching contribution formulas, and innovative education strategies.

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The Current Retirement Landscape

Workplace retirement savings vehicles, such as defined contribution (DC) plans, are one of the most common ways that US workers save for retirement. DC plan programs in the United States totaled $11 trillion in assets as of Q4 20211 and provide over 80 million participants with tax-deferred retirement accounts. As defined benefit plans — pensions — continue to decrease in number and with Social Security facing numerous funding-related headwinds, we believe DC plans will grow ever more critical to retirement outcomes.

Yet statistics show that DC plans are not benefitting all demographic groups equally. Income level is a key first determinant of retirement readiness, and employees in lower wage groups struggle across the board, with lower access to, participation in, and take-up rates for DC plans.

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

In terms of gender, a slightly greater percentage of women work for employers that offer retirement plans (69% vs. 65%), according to a 2020 National Institute on Retirement Security study, but a slightly greater percentage of men are eligible to participate in these plans (89% vs. 85%) and choose to do so (81% vs. 79%). This means men and women participate in DC plans at equal rates (47%). However, there is a significant gender gap in retirement income: Women aged 65 and older have a median household income of $47,244, or 83% of the $57,144 median household income of men aged 65 and over.

What explains this retirement wealth gap? The gender pay gap and employment gaps for pregnancy, child care, and caregiving for elders or spouses all may play a role. Also, divorce can lead to worse financial outcomes for women than men. These and a host of other reasons may negatively impact women’s retirement outcomes.

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

Households with Access to Retirement PlansHouseholds Participating in Retirement PlansHousehold Take-Up RateAverage 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, 28 September 2020

The numbers are even worse across race and ethnicity lines. The preceding table demonstrates the lower levels of access, participation, and average balances for households of color. The average account balance disparity is especially alarming.

While plan sponsors strive to design plans that improve retirement outcomes, these statistics show that quite a lot more needs to be done. To address this, three strategies are worth considering.

Tile of Defined Contribution Plans

1. Automatic Plan Design Features

Automatic enrollment is a tried-and-true method to increase retirement assets. A company’s new hires automatically start contributing to the firm’s DC plan at a pre-set deferral rate. The contributions are invested in the plan’s qualified default investment alternative — often a target-date fund (TDF) — until the employees re-direct their investments.

Auto-enrolled employees tend to remain enrolled — and at the deferral rate set by the plan’s automatic enrollment feature. Default enrollment helps overcome two key retirement savings challenges: lack of knowledge and inertia.

  • Knowledge describes the various lifetime experiences and formal and informal education that leads an employee to employment with a particular company. While some people 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 advisers due largely to a perceived mismatch between the community’s expected need and the financial adviser’s expected opportunity. This may reduce the likelihood that members of such communities will be familiar with or prioritize saving for retirement.
  • Inertia is a broad category, but our focus here is on two major types. Due to personal financial reasons — budget constraints, debt, etc. — many employees don’t believe they can set aside money for retirement. Other employees simply do not take the time to set up their retirement plan. They see it as “something to get to later” or otherwise delay enrolling in the retirement plan. What starts as “I’ll get to it tomorrow, next week, well definitely next month” can lead to months, years, or even a working lifetime of delayed retirement savings.

While automatic enrollment doesn’t affect access, it can increase participation among eligible employees, according to a 2021 study. Indeed, 84% of workers cited the feature as a primary reason for earlier saving. This tracks with the significant rise in plan sponsor adoption over the past decade. In 2011, only 45.9% of plans featured automatic enrollment, according to the Plan Sponsor Council of America. In 2020, 62% of plans did. Automatic enrollment helps employees overcome knowledge and time-related barriers, so we expect more plans will adopt the feature.

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For plan sponsors that want to add or augment an automatic enrollment feature, these additional considerations may help maximize the impact:

  1. Setting the default automatic enrollment deferral rate to a higher starting number. We believe the higher the default deferral percentage, the more likely automatic enrollment will improve employee retirement outcomes. The table below illustrates the default deferral percentages for plans with automatic enrollment. Six percent is the most often-used rate.
  2. Adding automatic escalation, whereby the employee contribution amount increases, up to a pre-specified amount in percentage increments, each year unless the employee opts out.
  3. Conducting automatic re-enrollment: Each year, employees who have opted out of enrollment in the DC plan must re-opt out.
  4. Examining whether the qualified default investment alternative (QDIA) is available to all employees and if it will improve retirement readiness for employees who do not otherwise change their investment selection.

Implicit in all these strategies is the idea that convincing an employee to not opt-out, or take no action, is easier than convincing them to opt-in, or require action. By making participation the easiest option for employees through automatic enrollment, more are likely to remain enrolled in the plan compared with the number of employees who would participate if they had to take personal action to opt-in.

Default Deferral Percentage in Plans with Automatic Enrollment

Percent of Plans1.0%5.2%29.0%12.9%16.1%32.9%2.9%
Source: Plan Sponsor Council of America’s 64th Annual Survey of Profit Sharing and 401(k) Plans (2021)

2. Creative Matching Contribution Formulas

An employer matching contribution is a primary incentive to participate in DC plans. Put simply, employer matching contributions feel like “free money” to employees.

Despite this, two major challenges have emerged. First, different studies have estimated billions of dollars in unrealized available “matching” that eligible employees don’t access. Second, for low-to-moderate income employees, a matching contribution made as a fixed percentage of their salary might not be enough to improve their retirement outcome. As an example, if an employee only saves $100 in a given year and the employer matches that $100, the absolute dollar value of $200 in retirement contributions is unlikely in aggregate to meaningfully improve the employee’s retirement readiness.

With this in mind, two strategies can improve retirement outcomes: minimum employer contribution levels and stretch-matching.

Secure Retirement graphic

A. 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 DC 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. This way, the minimum employer contribution would never be less than $1,000 per employee. (Changing your plan’s matching contribution formula may require an amendment to your plan document. Please consult your ERISA counsel or plan document preparer for more information.)

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. (The minimum match is prorated for hourly employees and those who are eligible for less than a full year.)

Minimum contribution levels can provide additional financial support to help increase potential retirement income for employees with lower pay. Of course, this method is not without cost — for example, the minimum contribution amount 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 they contribute at least 4% to receive the minimum match, can sharpen the impact toward improving employee retirement outcomes of this additional cost to employers.

Trust Study Tile

B. Stretch-Matching

This second option encourages 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 resembles anchoring bias: The first number employees see — an employer match formula of 100% on the first 4% of contributions — becomes an arbitrary benchmark. They assign meaning to the 4% number and often come to associate it with “enough 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, an employer might reengineer the above formula to match 50% on the first 8% of contributions. In this scenario, the employee’s “anchor” is set at an 8% contribution rate, which encourages higher net contributions without changing the dollar cost of the employer match.

To be sure, this method is not perfect. For example, lower-income employees might be unable or unwilling to contribute a higher percentage — above 4%, for example — thus leaving the employer match on the table and potentially reducing their aggregate, employee-and-employer, contribution rates in dollar terms. In this way, a stretch match might actually hurt lower-income employees rather than help. That’s why it is important to monitor participant behavior closely and adjust as needed following any changes to a plan’s matching formula.

3. 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 contribute to their DC plan and be given the tools to achieve the financial ability to do so. Comprehensive financial education and enhanced employee communications are crucial to this equation.

Financial Analysts Journal Current Issue Tile

A. Comprehensive Financial Education

Good financial education starts with data. Quantitative plan data can help identify if certain groups are under-engaged or unengaged in the plan. Are they not participating at all? Do they have low balances or a low deferral rate? Are they not receiving the full match? Surveys can bolster quantitative data with qualitative employee feedback. Then employers can design targeted education strategies based on both data and direct employee response. Once employers have the data, they can work with financial providers to customize holistic financial wellness programs for their workforce. These can range from on-site education sessions where an educator visits the office, factory, etc. to live or on-demand webinars, to points-based learning portals that incentivize employee participation, among other potential offerings.

There are plenty of jokes about all that we learned in school as children instead of basic financial concepts — “square dancing,” for example. Financial education strategies give employees the tools to make up for those lost learning opportunities and to help them build the requisite knowledge base to achieve financial wellness and retirement readiness. The PNC survey of C-suite and financial executives found that while only 57% of employers offer financial education today, 29% are planning to offer it in the future. We expect this trend to continue in the coming years.

B. Enhanced Employee Communications

The best education strategy is a failure if it never reaches employees. That’s why communication may be the most important part of employee education. There are several components to an effective communication strategy:

  • Various Media at Various Times: Different employees respond to different communication sources differently. Some prefer articles to read, some prefer live classes, some prefer on-demand videos, and others prefer other things. An effective communication strategy includes as many different data sources as possible, within reason, 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 use clear and concise language. The more understandable the information, the more effective the education strategies are likely to be.
  • Accessibility: Employee communications, educational materials, websites, and videos must be designed for use by the entire workforce, including employees with varying accessibility or non-English language needs. An important consideration is whether the employee education provider offers training with features that are compliant with the Americans with Disabilities Act (ADA), such as closed captioning, etc.
  • Inclusive Language: Inclusive language acknowledges diversity and conveys respect to all people. When plan sponsors feature inclusive language in their vernacular, including retirement documents and communications, they can help employees to feel heard and understood and potentially increase participant engagement. As more organizations increase their focus on DEI in hiring, retention, training, and beyond, ensuring employee benefit communications reflect this priority may be critical.
Tile for T-Shape Teams report

Slightly over half of respondents (55%) to the December 2021 PNC Survey 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 their engagement.

This perhaps more than anything else has the greatest potential to boost employee financial wellness and retirement outcomes.


Employers feel responsible for helping employees prepare for retirement. Beyond the productivity declines and other statistics that a lack of financial wellness is associated with, employers are starting to see their retirement plans as a pillar of an institutional social responsibility strategy. Implicit in this is the notion that companies can do well by doing good and especially by helping employees who might need it the most. With time and continued effort, we hope this will result in more equitable retirement outcomes for all.

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1. Data available at

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/John M Lund Photography Inc

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About the Author(s)
Christopher M. Dall, CFA

Christopher M. Dall, CFA, is managing director, Defined Contribution Retirement Solutions, for PNC Institutional Asset Management® (PNC IAM). In this role, he leads PNC IAM’s efforts to provide 3(21) investment advisory, 3(38) investment management, financial wellness, and employee education services for defined contribution plans. He provides functional oversight to the Retirement Plan Advisors and Employee Education Consultants who are responsible for providing defined contribution solutions to plan sponsors. Dall joined PNC in 2015 as an associate investment advisor. Most recently, he served as content manager, working closely with the IAM business and marketing teams to create thought leadership and other content for the Outsourced Chief Investment Officer (OCIO) and DC Retirement Solutions Groups. In addition, he has authored content featured on the CFA Institute Enterprising Investor blog and SHRM's blog, in addition to being quoted in industry news sources such as He has also presented on related topics at various industry conferences and local market events. Dall is a director on the Leadership Committee of Plan Sponsor Council of America (PSCA) and the chair of PSCA's Thought Leadership Council. He is an active member of the PNC IAM Diversity, Equity, and Inclusion Working Group and has served as the vice president of the Interfaith Employee Business Relations Group. Dall graduated with a bachelor's of science in finance from Penn State Erie, The Behrend College. He holds the chartered financial analyst® (CFA) designation. He also studied at Oxford College and Emory University.

Bradley Bonno

Bradley Bonno is a retirement sales and service director for PNC Institutional Asset Management® focused on driving strategy and accountability as he leads our Fiduciary Investment Services sales and service efforts. He provides functional oversight to the Retirement Plan Advisers (RPAs) and Employee Education Consultants (EECs) working within Institutional Asset Management who are responsible for the delivery of services to our defined contribution plan clients. Bonno’s insights and perspectives on financial wellness and participant education in the retirement industry have been featured in multiple articles, webinars and interviews. He has been a manager and director with PNC Institutional Asset Management for 18 years leading conversion, relationship management, and employee education teams during his tenure. Prior to joining the firm, Bonno worked with Federated Investors’ Retirement Plan Services group for more than six years. During his last four years with Federated, he served as the group’s conversion manager. In all, he more than 26 years of experience in the retirement plan industry. Bonno graduated with a bachelor's of science in business administration and accounting from Ohio State University.

Courtney Cervantes

Courtney Cervantes is a senior retirement plan advisor with PNC Institutional Asset Management®. In this role, she serves as the owner of the client relationship and advises on investments, fiduciary process, participant engagement and provider benchmarking. She provides fiduciary compliance education and support and keeps clients abreast of industry and legislative changes. Cervantes brings more than 16 years of institutional consulting experience with institutional consulting experience with defined benefit and defined contribution plan sponsors on all aspects of their investment programs, including investment manager structure, manager selection investment policy formulation, asset allocation strategy, and ongoing manager monitoring. Prior to joining PNC, she was a director at Willis Towers Watson, serving as a lead investment consultant for qualified retirement plans, including Fortune 100 and 500 companies. In her role, Cervantes helped to formalize a prudent monitoring process for the firm’s retirement plan clientele, including performance reporting, manager selection and ongoing monitoring, service provider collaboration, investment policy guidance, target-date fund glidepath suitability analysis, and plan benchmarking. Cervantes graduated with a bachelor's of business administration in finance from the University of Iowa. She is currently pursuing her master's of business administration from DePaul University in Chicago.

Domenique DiSilvio

Domenique DiSilvio is a retirement sales and service director for PNC Institutional Asset Management® focused on driving strategy and accountability as she leads our Fiduciary Investment Services sales and service efforts. She provides functional oversight to the Retirement Plan Advisers (RPAs) and Employee Education Consultants (EECs) working within Institutional Asset Management who are responsible for the delivery of services to our defined contribution plan clients. Prior to taking on her current role in 2017, DiSilvio was a retirement sales manager responsible for overseeing a team of RBDOs who assist clients and prospects with their organization’s retirement services needs. Previously, she was a senior relationship manager with the Vested Interest group, a Vested Interest senior account manager and team leader. Prior to joining the firm in 1999, DiSilvio was a retirement plan administrator with Federated Investors. She graduated with a bachelor's of arts in English literature from and a master's of business administration from Robert Morris University. DiSilvio holds the Certified Investment Management Analyst and Accredited Investment Fiduciary® (AIF) designations.

Jonathan McClain

Jonathan McClain is a director for the defined contribution practice in PNC Institutional Asset Management® (PNC IAM). He is responsible for leading the new business and client service efforts for PNC IAM’s largest and most complex defined contribution plan relationships. He works directly with clients and prospects to help them prioritize and achieve their plans’ goals. Prior to assuming his current role, McClain served as a principal consultant within the Defined Contribution practice of Mercer Investment Management. He provided retirement solutions by guiding retirement plan committees with investment selection and monitoring, plan design considerations, fiduciary education, and plan governance. McClain graduated with a bachelor's of science in economics and political economy from Portland State University. He holds the Accredited Investment Fiduciary® (AIF), Certified Retirement Plan Specialist, and Chartered Retirement Planning Counselor designations. He received the AIF® designation through the Center for Fiduciary Studies which assures that those responsible for managing or advising on investor assets have a fundamental understanding of the principles of fiduciary duty, He received the CRPS® and CRPC® through the College for Financial Planning. McClain was named to the 2018 and 2019 Financial Times Top 401 Retirement Advisors, a list of elite professionals who specialize in advising US employers on their defined contribution plans. McClain also received national recognition in 2015 when he was named a Top Plan Advisor under 40 by the National Association of Plan Advisors

Jessie Miller

Jessie Miller is a senior communications lead for PNC Institutional Asset Management®. In this role, he is responsible for creating and managing content including thought leadership, research, and actionable insights developed for institutional investors and their employees. Miller graduated with a master's of arts in communications from Syracuse University and with a bachelor's of arts in liberal arts from Tiffin University.

Krishna Subramanian

As an analyst for PNC Institutional Asset Management®, Krishna Subramanian is charged with maintaining strong relationships with clients. He regularly provides thought leadership, education, and insights to clients regarding both charitable and retirement assets. He manages portfolios in accordance with applicable fiduciary standards and the client’s investment objectives. He works with each client to determine asset allocation based upon their unique needs. He also supports the development of new business relationships. Prior to his current role, Subramanian was an Institutional Asset Management Intern at PNC and a Data Strategy Intern at Dow Jones. Additionally, he served as President and Senior Analyst of Panther Equity, a University of Pittsburgh student-managed investment fund. Subramanian graduated summa cum laude with a bachelor's of science in business administration in finance and business information systems from the University of Pittsburgh. He has volunteered with the Global Brigades Water program in Honduras, helping to build sustainable water infrastructure, and is involved with several food banks and environmental initiatives in his local community.

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