COLLECTED WISDOM™ On Automatic Enrollment

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. Located at: Ivins, Phillips & Barker, September 2009. Click on headline for full article.

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. Located at: CCH, September 2009. Click on headline for full article.

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. Located at: CCH, September 2009. Click on headline for full article.

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. Located at: NAGDCA, November 2008. Click on headline for full article.

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. Located at: Retirementmadesimpler.org, November 2008. Click on headline for full article.

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. Located at: Chang, Ruthenberg & Long, October 2008. Click on headline for full article.

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. Located at: TRI-AD , January 2008. Click on headline for full article.

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. Located at: Vanguard Center for Retirement Research , January 2008. Click on headline for full article.

Essentials of Automatic Contribution Arrangements - Summary: Practitioners have struggled to understand the differences and similarities between and among the various automatic contribution arrangements. This is a one page comparison of the characteristics of the various arrangements. Located at: Sungard/Relius , January 2008. Click on headline for full article.

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. Located at: Watson Wyatt Worldwide, January 2008. Click on headline for full article.

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. Located at: Dechert LLP , December 2007. Click on headline for full article.

Proposed Regulations for Automatic Contribution Arrangements - Summary: This is a comprehensive overview of the proposed nondiscrimination safe harbor for 401k plans with an automatic contribution arrangement. Located at: Kilpatrick Stockton LLP, November 2007. Click on headline for full article.

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. Located at: IRS , November 2007. Click on headline for full article.

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. Located at: Transamerica Center for Retirement Studies, September 2007. Click on headline for full article.

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? Located at: Journal of Financial Planning, September 2007. Click on headline for full article.

Enhancing 401k Value and Participation - Summary: Concerns about low levels of 401k participation and the need to make these plans more valuable to support a range of workforce goals have prompted some employers to enhance their plans by adding automatic features, such as automatic enrollment, escalation, rebalancing of investments, and "lifecycle" funds. To help employers better understand recent trends in 401k design and the pros and cons of automating 401k features, AARP commissioned Towers Perrin to prepare this 2007 report focused on midsize and large U.S. companies. Located at: AARP, July 2007. Click on headline for full article.

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. Located at: ERISA Diagnostics , June 2007. Click on headline for full article.

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. Located at: Schwab Retirement Plan Services , January 2007. Click on headline for full article.

Hewitt Study Reveals Impact of Automatic Enrollment - Summary: Despite increases in employee enrollment rates, quality of participation continues to remain a challenge. Located at: 401khelpcenter.com, November 2006. Click on headline for full article.

Key Provisions of the Pension Protection Act of 2006 - Summary: On August 3, 2006, the Senate passed HR 4, the Pension Protection Act of 2006, by a vote of 93 to 5. Sal L. Tripodi, for ASPPA, has authored this detailed summary of the preliminary review of the 907-page bill including the automatic enrollment provisions. Located at: ASPPA, August 2006. Click on headline for full article.

Capitalizing on Inertia: Automation Boosts Retirement Savings - Summary: This paper provides a survey of academic research that explores the impact of certain plan features that lead to greater participation and contribution rates, and, ultimately, to greater financial security in retirement. Through the design of their DC plans, employers play a critical role in assisting their employees accumulate retirement assets. By understanding the relationship between plan design and observed savings outcomes, employers can alter their plans to help achieve desired results. Located at: TIAA-CREF , June 2006. Click on headline for full article.

Automatic 401k Overview for Employers - Summary: Some employers have taken over the wheel and helped their employees put their retirement plans on "autopilot." The simple approach is an "automatic" 401k sometimes called an autopilot plan. This is a great overview put together by AARP. Located at: AARP, June 2006. Click on headline for full article.

Make It Automatic - Summary: "Automatic" 401k accounts, sometimes called autopilot plans, bypass employee inertia by setting "default" plan participation levels for workers who make no choice about their 401k investing options. CFO magazine senior editor Roy Harris weighs the pros and cons of this approach to boosting retirement saving. Located at: CFO.com, April 2005. Click on headline for full article.

Automating Your Savings Plan to Provide Retirement Security - Summary: Two factors that have the biggest impact on retirement accumulations are how much and how long one saves. Starting early in one's working career and contributing at a meaningful level will greatly affect one's retirement security. But getting employees to embrace this reality has been difficult. Employee inertia is widely reported, and convincing employees to change their current behavior has been a persistent challenge. In this Perspective, Mercer takes a look at some automatic design features as well as other strategies that encourage savings among employees. Located at: Mercer Human Resource Consulting , February 2005. Click on headline for full article.

CRS Report for Congress: Automatic Enrollment in 401k Plans - Summary: Although both automatic enrollment and automatic increases in employee contributions are permissible under federal law, only about 8% of 401k plans have adopted automatic enrollment, and even fewer automatically increase employees' contributions over time. Some financial analysts have suggested that Congress could promote wider adoption of automatic enrollment through legislation. Located at: Congressional Research Service Via ERIC , October 2004. Click on headline for full article.

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