The financial constraints imposed by the economic downturn have had little effect on the percentage of employers offering and employees participating in 401(k) plans that have an automatic enrollment feature, benefits consultants and others say.

The prevalence of automatic enrollment 401(k) plans—which divert a percentage of an employee's paycheck into a retirement account unless the worker specifically opts out—has risen dramatically in recent years. About half of U.S. employers with 401(k) plans offer automatic enrollment, according to various estimates.

The Chicago-based Profit Sharing/401k Council of America estimates that 56.3% of companies with more than 5,000 active employees participating in their 401(k) plans automatically enroll at least some of those workers, up from 17.3% in 1999. Such plans increase costs for employers, who often match employee contributions, and they decrease the amount of each paycheck for workers. Still, observers say they have seen little drop-off in the popularity of such plans over the past year, despite the financial pressures of the recession.

“I think inertia is so powerful—just the tendency to go with what you have done,” said Pamela Hess, director of retirement research at Lincolnshire, Ill.-based Hewitt Associates Inc.

“It takes work to change what you're doing and everyone's busy. And I do think there are some people who don't know what to do and if I don't know what to do, I'm just going to keep doing what I'm doing because I don't want to make a mistake,” Ms. Hess added.

One of the reasons the plans have become popular is their participation rate: In 401(k) plans that automatically enroll new hires, more than 90% of the eligible new employees participate, compared with between 60% and 70% of employees in traditional 401(k) plans, according to various consultants and observers. Experts say the participation rate for all of a company's workers often reaches 90% a few years after implementing automatic enrollment, because of turnover.

And those observers say that they have seen little change in that participation rate over the past year. About 91% of eligible employees participated in automatic enrollment 401(k) plans in 2007, 2008 and so far in 2009, said Michael Doshier, the Marlborough, Mass.-based vp of Fidelity Investments' workplace investing group.

Those figures do not include laid-off workers, but consultants say the consistent rate reflects how effective automatic enrollment plans are at retaining participants.

“Unless you are absolutely grasping for every cent you can get, I don't think people are looking at their 401(k) plan,” said Robyn Credico, the Arlington, Va.-based national director of defined contribution plan consulting at Watson Wyatt Worldwide. “They're just leaving it alone.”

The recession has prompted slightly more change by employers. Experts say they are not aware of any company that has ended its automatic enrollment plan, although some that were planning to implement them have opted to wait. Ms. Credico said only 1% of companies without automatic enrollment plans intend to add them in 2009, but another 32% are considering adding them in 2010 or beyond.

Still, some employers have reduced or suspended their matching contributions—10% of companies, according to PSCA and Fidelity. Experts say most companies plan to restore the contributions when the economy recovers, as happened in the early part of this decade when the economy also slid. But observers say the suspensions could affect employee participation rates, although those rates have remained mostly unchanged so far. Many workers are passive and participate in automatic enrollment plans by default, they say.

“The inertia effect may be so powerful that (matching contributions) might not even matter,” said Stephen Utkus, director of the Center for Retirement Research at Valley Forge, Pa.-based Vanguard Group Inc.

While inertia may keep workers saving, it may lead to problems later. Typically, an automatic enrollment plan starts workers at a 3% deferral rate, and often workers remain at that contribution level, which is not enough for most people to build sufficient retirement savings, experts say.

Employees who enroll in non-automatic 401(k) plans are more likely to defer at a higher level to earn the maximum matching contribution from their employer, said Amy Reynolds, a principal in the Richmond, Va., office of Mercer L.L.C.

Experts say informing the workforce about this issue is crucial.

“401(k) can't be static,” said Delia Vetter, senior director of benefits and programs for EMC Corp. in Hopkinton, Mass. “You can't just auto-enroll (workers) and leave them alone. You need to constantly educate employees about the importance of planning for retirement.” EMC began offering automatic enrollment in 2007.

Besides informing workers about retirement savings, another increasingly popular tool is a feature that automatically increases employee contributions in automatic-enrollment 401(k) plans each year.

Employees enrolled at a 3% deferral rate might automatically contribute 4% in their second year and 5% in their third year, up to a maximum deferral of 6%, under a typical automatic escalation feature.

The thinking behind this feature is that an employee's annual salary increase would mask the higher retirement plan contributions so that a typical paycheck would be the same size from year to year. In the current economic climate, workers are receiving fewer raises, but consultants say this feature continues to be popular. According to PSCA, 36% of automatic enrollment plans in 2008 had an automatic escalation feature, compared with 32.8% in 2007.

PSCA president David Wray said companies increasingly are designing automatic enrollment plans that start new participants at higher contribution levels. Vanguard's Mr. Utkus said his firm used to tell clients to aim to achieve a savings rate—employee deferrals plus employer matching contributions—equal to between 9% and 12% of pay, but last month increased that target to between 12% and 15% because of the stock market deterioration and long-term concerns such as accelerating health care costs.

Charlie Yovino, an Atlanta-based principal in the human resource services practice of consultant PricewaterhouseCoopers L.L.P., said automatic enrollment plans with automatic escalation features often are not the cheapest way for companies to ensure workers are saving adequately for retirement.

“I think a lot of employers perceived it as somewhat cost-neutral and I think it's starting to become a little more apparent that it's not a cost-neutral alternative,” Mr. Yovino said.

Still, automatic enrollment remains a popular choice. A Mercer survey released earlier this month found that one-third of organizations that sponsor defined contribution retirement plans in 33 countries around the world use automatic enrollment. Also, one-third of the surveyed organizations automatically escalate employees' deferral level.

The next step for automatic enrollment 401(k) plans may be enrolling existing employees. Ms. Hess said that more companies would have applied automatic enrollment plans to current employees this year if not for the recession. About 80% of automatic enrollment 401(k) plans are limited to new hires, according to Vanguard.