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COLLECTED WISDOM™ on Automatic 401k Plan Features

This is an archive of information related to 401k automation features like automatic enrollment.

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.

    
Auto-Escalation Use in 401k Plans Too Low, Northern Trust Report Finds

Abstract: The adoption rate of auto escalation by 401k plans is too low at 32%, said a report issued Monday by Northern Trust Asset Management. Despite the low adoption rate, 66% of participants whose plans lack an auto-escalation feature said "they would likely accept the automatic annual increase," the report said.

Source: Pionline.com, September 2016

Automation Making Huge Retirement Plan Impact

Abstract: Retirement plan participation has increased 19% in the past five years because of design features that make it simple and quick for employees to participate in their workplace retirement plans.

Source: Benefitnews.com, July 2016

Automatic Plan Features in DC Plans: What's in It for Plan Sponsors?

Abstract: This 14-page white paper highlights several potential benefits of automatic plan features to the employer and profiles plan sponsors who have experienced these benefits. Additionally, it provides a roadmap for implementation that suggests strategies a plan sponsor may employ to implement automatic plan features over a multi-year period.

Source: Dciia.org, July 2016

Unintended Consequences Can Result From Job-Jumping Millennials

Abstract: Auto-services are widely touted as positive developments that drive better participant outcomes. Until now, however, they have been deployed on a very company-loyal demographic. How effective are those same services for a generation that changes jobs every few years?

Source: Troweprice.com, July 2016

Managing Plan Costs in Automatic Programs

Abstract: Plan sponsors today are faced with unprecedented challenges in offering effective retirement plans. Achieving plan objectives in an environment of constrained budgets, talent competition, and increasingly complex fiduciary requirements can sometimes seem like a difficult balancing act. However, with the right combination of plan design and automated program features, retirement plan effectiveness can often be improved within reasonable budget levels.

Source: Troweprice.com, July 2016

Advances in Automatic Savings Program Design

Abstract: Defined contribution plans have experienced significant growth in the adoption of automatic savings programs since the 2006 introduction of the Pension Protection Act. While these programs have generally delivered laudable results, their progress can be hindered by certain plan designs.

Source: Troweprice.com, July 2016

Enhance Investment Behaviors and Outcomes With Re-Enrollment

Abstract: It's become clear that two employee segments have been significantly left out of the impact of auto-features in DC plans, affecting their chance for retirement savings success. Providing access to all employees to engage in the plan, through re-enrollment, can have a significant impact on the success of the plan's objectives.

Source: Pionline.com, May 2016

White Paper Released on Auto Enrollment in 401k and 403(b) Plans

Abstract: Paragon Alliance Group has developed a new white paper that is designed to provide insight into the pros and cons of auto enrollment, and why it may or may not be suitable for all plan sponsors.

Source: 401khelpcenter.com, March 2016

DC Plan Re-Enrollment: A Fiduciary Imperative?

Abstract: This paper looks at the role a re-enrollment campaign can play in guiding all plan participants to an appropriate asset allocation, common reasons cited by plan sponsors for avoiding re-enrollment, and counterpoints to each, key elements of a successful implementation, and re-enrollment terminology.

Source: Russell.com, March 2016

Reshaping Participant Outcomes Through Reenrollment

Abstract: Reenrollment into a low-cost qualified default investment alternative, such as a low-cost target-date series, can rapidly improve diversification and reduce fees for participants -- potentially leading to higher retirement wealth accumulations in the future.

Source: Vanguard.com, March 2016

Automatic Features in Defined Contribution Plans

Abstract: Automatic enrollment, offered in conjunction with automatic escalation, can positively impact participant behavior and improve retirement readiness. This article examines some best practices to be considered when implementing automatic features in defined contribution plans that can produce greater results per dollar of employer cost.

Source: Strategicbenefitservices.com, February 2016

Auto Escalation Beats Inertia, So Why the Hesitancy?

Abstract: While 62 percent of employers with large plans (over $200 million in assets) automatically enroll new employees into their plan, far fewer (48 percent) have adopted automatic escalation. Article reviews so of the reasons employers give for not offering automatic escalation.

Source: Shrm.org, February 2016

'Back-Sweeping' to Boost 401k Participation

Abstract: Aon Hewitt study finds a growing number of companies auto-enrolling, or "back-sweeping," all existing employees who aren't already participating in 401k plans. This practice can certainly have advantages if properly communicated to affected workers, experts say.

Source: Hreonline.com, December 2015

Re-Enrollment: An Easy Button for DC Plans

Abstract: Close your eyes and imagine that there was a button plan sponsors could press that would turn participant inertia into an asset, and help improve sub-optimal asset allocations while simultaneously putting the plan sponsor on more solid fiduciary footing. Luckily there is, it's called re-enrollment.

Source: Manning-Napier.com, December 2015

Understanding Re-Enrollment

Abstract: A plan re-enrollment is a process by which participants are notified that their existing assets and future contributions will be invested in the plan's qualified default investment alternative, unless they make a new investment election during a specified time period. This paper explains the concept of re-enrollment and outlines potential benefits to participants and plan sponsors.

Source: Jpmorganfunds.com, December 2015

The Power of Re-enrollment

Abstract: How can plan sponsors help participants make the most of the sponsor's 401k plan? Re-enrollment is one strategies that takes advantage of inertia -- the same behavior that challenges plan sponsors and participants alike.

Source: Ssga.com, November 2015

The Auto Savings Generation: Steering Millennials to Better Retirement Outcomes

Abstract: Automatic enrollment and the rise of target-date funds are reshaping retirement plan outcomes for all generations. However, these innovations are having the greatest impact on millennials' retirement savings. This 16-page paper highlights some of the generational differences as a result of these changes.

Source: Vanguard.com, October 2015

Automatic Savings Increase Tool Enhances 401k Plan

Abstract: This article discusses how one organization's 401k plan achieved higher employee participation as well as greater savings rates two years after adding automatic contribution increases.

Source: Retirementtownhall.com, September 2015

Automatic Plan Features: Responses to Selected Webcast Q&A

Abstract: DCIIA's Retirement Research Board conducted a webcast to share the results of a research study on plan sponsor attitudes and behaviors regarding automatic plan features. As a supplement to the presentation material used for the discussion, the speakers have answered select questions submitted by the conference call attendees.

Source: Dciia.org, September 2015

Leading the Horses to Water: 401k Plan Re-enrollment and "Backsweeps"

Abstract: While perfect solutions to these problems have yet to be developed, one approach on the savings and investment front that has gained traction in the last ten years is the "lead the horses to water" approach. That is, automatically enrolling employees in a defined contribution plan and then defaulting those who do not otherwise make an affirmative investment election into an appropriate investment fund, subject to opt-out.

Source: Morganlewis.com, September 2015

Another EPCRS Update: Automatic Enrollment

Abstract: Revenue Procedure 2015-27 made several updates to the Employee Plans Compliance Resolution System, or EPCRS, found in Revenue Procedure 2013-12. This article examines the auto-enrollment changes to EPCRS to determine their impact on 403(b)/457(b) plan sponsors.

Source: Cammackretirement.com, September 2015

Using Re-enrollment to Improve Asset Allocation

Abstract: Case study on how one group of advisors worked with a plan sponsor to chart a new course for employees, utilizing re-enrollment and automatic features.

Source: Jpmorganfunds.com, August 2015

When Onboarding New Participants, Keep It Simple

Abstract: Plan advisers should be wary of potential complications when designing their automatic features. Most retirement plan advisers are looking at what makes the biggest impact in getting people in the plan and new ways to get younger employees engaged with the retirement plan -- and keep them there.

Source: Planadviser.com, August 2015

Automatic Enrollment: Only Part of an Overall Strategy

Abstract: Automatic enrollment is here to stay. It is increasingly popular and sooner or later, it may become the norm in most 401k plans. Regardless of the goals you hope to accomplish, it is important to understand that it often will not achieve the desired result on its own. However, as part of an overall strategy, automatic enrollment can be an effective springboard to improve plan operations and create a culture of savings among employees.

Source: Markleyactuarial.com, July 2015

403(b) Automatic Enrollment Best Practices Guide

Abstract: This new resource offers best practices for 403(b) non-ERISA plans is a comprehensive resource prepared by NTSA. It provides information relevant to all stages of providing auto enrollment of 403(b) participants including what an employer should consider before adopting an auto enrollment plan.

Source: Ntsa-net.org, July 2015

Relationship Between Automatic Enrollment and DC Plan Contributions: Evidence From a National Survey

Abstract: This paper reexamines the determinants of 401k participation and contributions in the presence of automatic enrollment using nationally representative data from the Health and Retirement Study for 2006 through 2012. The results confirm previous findings that automatic enrollment is associated with a higher proportion of workers included in DC plans; however, automatically enrolled workers are less likely to contribute to their DC plans than voluntarily enrolled workers.

Source: Bc.edu, July 2015

Plan Sponsor Survey: Focus on Automatic Plan Features

Abstract: DCIIA recently completed its third biennial survey of DC plan sponsors' use of automatic plan features such as automatic enrollment, automatic contribution escalation and plan reenrollment. This survey of over 450 plan sponsors, ranging from sponsors of the largest plans (over $1 billion) to the smallest (under $5 million), found that the adoption of auto features is having its intended effect: more participants are saving for retirement, and saving at increasingly higher and more meaningful rates.

Source: Dciia.org, June 2015

Another Reason for Auto-Features in DC plans: Cognitive Decline

Abstract: As with many of the other behavioral challenges in DC plan design, part of the answer may lie in auto-features. For example, to the extent that the key financial decisions -- investment strategy and drawdown decisions -- can be specified in advance, the impact of any cognitive decline may be reduced.

Source: Russell.com, May 2015

Mindless Pitfalls: Don't Leave 401k Automatic Enrollment Plans Alone

Abstract: The biggest advantage (and disadvantage) of automatic enrollment is that employees don't have to do anything. It's the essence of automatic enrollment. But it also makes people less responsible for their own retirement decisions. Punam Anand Keller, PhD, Tuck School of Business at Dartmouth discusses barriers to automatic enrollment plans and the solutions to overcome them.

Source: Invesco.com, March 2015

Auto Enrollment - Unforeseen Admin Costs Attributable to Small Account Balances

Abstract: An experience many plan sponsors encounter following the rollout of a 401k auto enrollment campaign is an increase in the number of non-participating individuals with relatively small account balances. These small accounts can significantly impact the costs of plan administration. With sufficient planning, auto enroll can be implemented without drastically altering costs, but what can be done when it's too late and the growth of small account balances begin costing you money?

Source: 5500audit.com, March 2015

The Effects of Automatic Enrollment - A Comprehensive View

Abstract: Automatic enrollment is an optional plan feature in which participants are enrolled into their employer's plan as soon as they are eligible, with the option to opt out. Various studies have shown that automatic enrollment increases plan participation dramatically with very few participants choosing to opt out, but its effect on the plan overall is often overlooked.

Source: Ekonbenefits.com, March 2015

Most Employers Auto-Enroll 401k Participants

Abstract: Most employers now offer automatic features in their 401k plans to ensure that workers are saving enough to receive full company matching contributions over time, according to a survey by the benefits consulting firm Aon Hewitt.

Source: Businessmanagementdaily.com, March 2015

Researchers Find Little Cost Difference From Auto-Enrollment

Abstract: Automatic enrollment is often expected to increase employer compensation costs as previously unenrolled workers start to receive matching retirement plan contributions, but researchers have found this not to be true.

Source: Planadviser.com, March 2015

Companies Are Improving Automatic Features in 401k Plans

Abstract: To improve the long-term financial outlook for workers, a new survey from Aon Hewitt, reveals that the majority of companies now offer automatic features in their 401k plans to ensure that workers are saving enough to receive full company matching contributions over time.

Source: Wolterskluwerlb.com, February 2015

Getting Auto-Enrollment Implementation Right

Abstract: Implementing automatic enrollment without thinking through plan design can result in compliance and administrative issues. Plan failures due to automatic enrollment, either breaking the law or operational failures, happen. So plan sponsors should put language in their plan document that is easy to follow and not burdensome to live with.

Source: Plansponsor.com, February 2015

Automatic Enrollment, Employer Match Rates and Employee Compensation in 401k Plans

Abstract: This study examines the relationship between automatic enrollment and employee compensation. A significant negative correlation exists between the generosity of the employer match structure and the automatic enrollment provision. However, study finds no evidence that total compensation costs or DC costs differ between firms with and without automatic enrollment, and no evidence that DC costs crowd out other forms of compensation.

Source: Ssrn.com, February 2015

401k Automatic Enrollment - Things to Consider

Abstract: At first glance, adding an auto enrollment feature to your Company's 401k Plan appears to be a simple way to increase Plan participation. In practice, there can be some unintended consequences in implementing auto enrollment. This article covers some potential hurdles and adjustments you may want to consider to get the desired effects.

Source: 5500audit.com, February 2015

401k Automation May Have Peaked

Abstract: Automation is a hot topic in defined-contribution plans, but while there has been a steady increase in the adoption of features such as automatic re-enrollment and other automatic plan features, they still haven't reached ubiquity and might never get there. That is one conclusion that can be found in the Callan Investment Institute's "2015 Defined Contribution Trends" study.

Source: Benefitspro.com, January 2015

Automatic Enrollment: The Power of the Default

Abstract: Sponsors can use the inertia inherent in participant retirement savings decisions to improve retirement outcomes in defined contribution plans. This 16 page report provides updated statistics drawn from Vanguard recordkeeping data of the effects of automatic enrollment on participants' saving and investing behaviors.

Source: Vanguard.com, January 2015


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