Employers' use of 401(k) auto-enrollment feature growing: Survey
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Automatic enrollment, once an unusual feature in 401(k) plans, is now offered in a majority of the plans, according to a new survey.
The survey released Wednesday by the American Benefits Institute, a unit of the American Benefits Council in Washington, and WorldatWork in Scottsdale, Ariz., found that 56% of respondents now include an automatic enrollment feature in their 401(k) plans.
Automatic enrollment is aimed at those employees who don't respond when asked by their employer if they would like to participate in the organization's 401(k) plan. Such employees, unless they object, are then automatically enrolled in the 401(k) plan.
With the number of employers that offer defined benefit pension plans shrinking, employee participation in 401(k) plans is crucial to ensure that employees have some funds set aside for retirement.
And more employers intend to add that feature to their 401(k) plans, according to the survey, with 18% of respondents saying they are considering adding an automatic enrollment feature to their 401(k) plans.
The survey also found that 26% of employers include an automatic escalation feature as part of automatic enrollment.
Under automatic escalation, the percentage of salary contributed by employees who are automatically enrolled in the 401(k) plan increases by a stipulated amount — typically 1% to 1.99% of salary — each year until hitting a ceiling.
The survey is based on 476 responses, a sizeable majority — 71% — having more than 1,000 employees.
