COLLECTED WISDOM™ on Automatic Enrollment
Employers Adding Automatic Enrollment to DC Plans - Summary: More employers intend to add automatic enrollment features to their 401k and other defined contribution plans, according to an Aon Hewitt survey. Under automatic enrollment, employees who don't respond to participation notices are enrolled automatically in a plan unless they notify their employers that they want to opt out.
Source: Workforce.com, January 2012.
Automatic Enrollment Boosts Participation for All Racial and Ethnic Groups - Summary: New Vanguard research on diversity and retirement plan saving and investing shows that automatic employee enrollment into company 401k plans raises participation—the critical first step in taking advantage of these plans—for all racial and ethnic groups. The increase is particularly notable for blacks and Hispanics, especially low earners.
Source: 401khelpcenter.com, October 2011.
Are Automatic Enrollment Plans a Success? - Summary: The short answer to the question is yes. Many studies have indeed indicated that adding automatic enrollment features to a plan helps to facilitate participation rates going up significantly. From that perspective it is certainly a success. However, sponsors and their employees should not be lulled into a false sense of security.
Source: Milliman, April 2011.
Small Business Guide to Automatic Enrollment 401k Plans - Summary: Do you want a retirement plan that provides a high level of participation and makes it easy for you to withhold employee contributions and select the investments for those contributions? Then you may want to consider an automatic enrollment 401k plan. This tutorial provides an overview of such 401k plans.
Source: Learnthat.com, December 2010.
Raising the Bar: Pumping Up Retirement Savings - Summary: While progress has been made in helping people save, particularly via automatic enrollment and contribution escalation programs, this research report shows strong evidence that by adjusting the implementation of these features and influencing certain employee actions, plan sponsors can materially improve retirement outcomes for all employees.
Source: Defined Contribution Institutional Investment Association 
, October 2010.
The Impact of Auto-enrollment and Automatic Contribution Escalation on Retirement Income Adequacy - Summary: This new study finds that auto-enrollment and auto-contribution escalation in 401k plans -- depending on how they're implemented and used -- can result in a big improvement in retirement savings, especially for low-income workers.
Source: Employee Benefit Research Institute , October 2010.
Knowing About Auto Features in DC Plans Doesn't Mean They're Used - Summary: Ninety-four percent of large employers with defined-contribution plans are familiar with 401k automatic enrollment and 78 percent are familiar with automatic escalation, but only 42 percent use auto enrollment and 28 percent use auto escalation.
Source: Workforce.com (free registration may be required), June 2010.
Automatic 401k Plans: Employer Views - Summary: Although nearly all large employers with 401k plans are at least somewhat familiar with automatic enrollment, the majority have not adopted it for their own 401k plan. Specifically, less than half (42%) of respondents report that their 401k plan includes automatic enrollment.
Source: AARP, June 2010.
Implementing a 401k Automatic Enrollment Arrangement - Summary: Recent changes in the law under the Pension Protection Act of 2006 and regulations issued thereunder have made "automatic enrollment arrangement" easier to implement and more palatable to both employers and employees.
Source: Ivins, Phillips & Barker, September 2009.
IRS Illustrates Application of Escalator Provision in 401k Automatic Contribution Arrangements - Summary: The IRS has issued guidance in Rev. Rul. 2009-30 clarifying the use of escalator provisions in 401k plan automatic contribution arrangements that allow for an adjustment in the amount of an employee's default contributions based on increases in pay.
Source: CCH, September 2009.
Sample Plan Amendments for Adding 401k Automatic Contribution Features - Summary: The IRS has issued two sample plan amendments in IRS Notice 2009-65 that will enable employers to add automatic contribution features to their 401k plans. Sample Amendment One may be used to add an automatic contribution arrangement to a 401k plan. Sample Amendment Two may be used to add an eligible automatic contribution arrangement (authorizing withdrawals of elective deferrals) to a 401k plan.
Source: CCH, September 2009.
The Automation of DC Plans - Summary: The Pension Protection Act of 2006 opened the door for private sector employers to take a more commanding role in how their employees save for their retirement future and presents those plan sponsors with a new series of considerations. Article discusses automatic enrollment, auto escalation, and QDIA.
Source: NAGDCA, November 2008.
The Business Case for 401k Automatic Enrollment - Summary: Companies using automatic 401ks have seen employee participation rates soar (often to well above 90%) and especially among lower-income and minority workers who are too often left behind. They have found there are at least three sound business reasons for using automatic enrollment.
Source: Retirementmadesimpler.org, November 2008.
Automatic Enrollment – Time to Plan and Act - Summary: This is an introduction to the basics of automatic contribution arrangements and an overview of how automatic enrollment (with or without employer matching contributions) can maximize retirement savings for all employees, with employee dollars.
Source: Chang, Ruthenberg & Long, October 2008.
401k Automatic Enrollment -- What You Need to Know - Summary: The automatic enrollment feature is growing rapidly in popularity. Here is what you need to know and action steps to implement automatic enrollment.
Source: TRI-AD , January 2008.
Measuring the Effectiveness of Automatic Enrollment - Summary: An analysis of about 50 plans adopting automatic enrollment confirms that the feature does improve participation rates, particularly among low-income and younger employees.
Source: Vanguard Center for Retirement Research , January 2008.
IRS Proposes Regulations on Automatic Contribution Arrangements - Summary: The IRS has issued proposed regulations on automatic contribution arrangements under the Pension Protection Act of 2006 (PPA). The proposed regulations address the special 401k nondiscrimination test safe harbor for qualified automatic contribution arrangements.
Source: Watson Wyatt Worldwide, January 2008.
Proposed Rules and Sample Notice Regarding Automatic Enrollment Arrangements - Summary: An overview of these increasingly popular arrangements, as they helped employers increase participation in 401k plans and other programs, and provided a way to encourage employees to save for their retirement.
Source: Dechert LLP , December 2007.
Sample Automatic Enrollment and Default Investment Notice - Summary: To aid plan sponsors in satisfying the requirements of the IRSs proposed regulations for the 2008 plan year – the first plan year that a plan may include a QACA or EACA – the IRS has posted this sample "Automatic Enrollment Notice" that satisfies notice requirements.
Source: IRS , November 2007.
An Overview of Automatic Enrollment - Summary: Overview of automatic enrollment including who are good candidates to adopt the this enrollment feature and what employees should know about automatic enrollment.
Source: Transamerica Center for Retirement Studies, September 2007.
Will Automatic DC Programs Eliminate Need for Education and Advice in the Workplace? - Summary: Given that the Pension Protection Act addresses plan sponsors' primary concerns, do we still need to offer education and advice to employees? Can't we simply auto-enroll, auto-escalate, and auto-allocate, and call it a day—or a decade?
Source: Journal of Financial Planning, September 2007.
Automatic Enrollment: More Choices, More Decisions for Plan Sponsors - Summary: The PPA has provided opportunities which will help participants save more for retirement, simplify the investment process and provide fiduciary relief to plan sponsors. One of those opportunities is automatic enrollment. Many plan sponsors had concerns implementing automatic enrollment and this article dicusses many of those concerns.
Source: ERISA Diagnostics , June 2007.
Automating Your Retirement Plan - Summary: More and more plan sponsors are considering automated components for their retirement plans because they encourage saving, increase participation, and may improve non-discrimination testing results. And now that the Pension Protection Act is law, plan sponsors have even more flexibility to help participants increase their retirement savings.
Source: Schwab Retirement Plan Services , January 2007.
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