Automatic Enrollment
Fifteen percent of plan sponsors surveyed have implemented automatic enrollment in their plans—a small (approximately 2%) increase over the past two years. Ten percent of respondents are considering adding this feature, while 1% has discontinued it. Key reasons for discontinuing the automatic enrollment program include: cost of providing match to disinterested employees, cost of administering small account balances, inability of the record keeper to accommodate the feature, and incompatibility with newly merged plans.
“The good news,” notes the survey “is that automatic enrollment works! More than two-thirds (71%) indicated that participants typically maintain the designated de-fault rate, while 24% choose to increase their default rate. Only 5% choose either to opt out of the plan (3%) or to decrease their default election (2%).” Ninety-seven percent of plan sponsors that offer automatic enrollment are satisfied with this feature.
Additional survey findings include:
· Twenty-four percent of plan sponsors offer their participants’ automatic fund rebalancing, making it more convenient for them to maintain their target asset allocations.
· Account aggregation (the ability for participants to see their account balances in other employer-sponsored plans, outside investment funds, bank accounts, etc., through their 401(k) provider’s Web site) is a feature offered by 29% of the survey respondents, and another 7% are considering it. Interestingly, 52% are not offering account aggregation because it is unavailable from their providers.
· More employers are offering both fixed and discretionary components to their matching contributions.
· A trend toward easing participation eligibility restrictions based on employment tenure and age remains in full force.
· Participant use of the Internet to access plan information is rising rapidly.
