401(k) auto-enrollment prevalent at large firms: Survey

More than half of large employers automatically enroll employees into their 401(k) plans, according to research released Wednesday.

The Towers Watson & Co. survey found that 57% companies with 1,000 or more employees automatically enrolled workers into their 401(k) plans, including 39% that automatically enroll new employees and 18% that automatically enroll all employees.

Additionally, the New York-based consultant found that of the 334 companies surveyed, another 3% of companies plan to begin automatic enrollment into 401(k) plans by next year and an additional 18% are considering it.

The survey also found that, in 2009, few employees declined enrollment into the retirement option, with 85% of companies surveyed reporting that fewer than 10% of those employees automatically enrolled opted out.

Target-date funds are the most prevalent default investment option, Towers Watson said, with nearly 72% using target-date or “life cycle” funds as a default retirement investment option, followed by 13% of respondents who use balanced or lifestyle funds.

“Evaluating target-date funds is critical for employers, particularly as the number of plan sponsors that use these funds as their default option for workers who are automatically enrolled in 401(k) plans continues to grow,” said Sue Walton, senior investment consultant at Towers Watson, in a statement. “Choosing and developing the most appropriate target-date fund strategy will be crucial for employers to help their employees save for a secure and comfortable retirement.”

The survey also found that 18% of respondents offer annuities to participants or plan to do so in the next year. Meanwhile, 18% of respondents either reduced or suspended their matching contribution to 401(k) plans during 2009 and into 2010, with about 49% reporting that they have yet to restore the match but are considering doing so within the next 12 months.