401(k) auto-enrollment growing in popularity with employers
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More employers are adding automatic enrollment features to their 401(k) and other defined contribution plans, according to a survey.
In 2014, 68% of employers surveyed by Towers Watson & Co. offered an automatic enrollment feature, up from 65% in 2012 and 57% in 2011.
Employers, though, typically limit automatic enrollment programs to new employees. For example, of the 68% of employers with automatic enrollment programs, 47% offer it to newly hired employees and 21% extend it to all employees.
Under automatic enrollment, employees who don't respond to participation notices are enrolled automatically in a plan unless they notify their employers by a set date that they want to opt out.
The survey, released Wednesday, also found that while 54% of employers offer a Roth feature to their defined contribution plans, that feature is underutilized. Just 8% of highly compensated employees and 11% of non-highly compensated employees make Roth contributions, the survey found.
Unlike traditional 401(k) plan contributions, Roth contributions are made on an after-tax basis. That means no tax break at the time the contributions are made, but those contributions, as well as investment earnings, can be withdrawn tax-free after a certain number of years.
The results are based on responses from 457 plan sponsors.
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