More Employers Adding Automatic Enrollment to Defined Contribution Plans: Survey

More employers are adding automatic enrollment features to their 401(k) and other defined contribution plans, according to new research.

In 2012, 65 percent of employers surveyed by Towers Watson & Co. offered an automatic enrollment feature, up from 57 percent in 2011 and 51 percent in 2010.

However, employers are more likely to limit automatic enrollment programs to new employees. For example, of the 65 percent of employers with automatic enrollment programs, 42 percent limit it to newly hired employees, while 23 percent 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.

In addition, among employers now offering automatic enrollment, 71 percent also include an automatic escalation feature in which contributions automatically increase by a certain percent or amount each year.

“By using automatic escalation, employers help employees increase their own savings and benefit from the additional employer match,” New York-based Towers Watson said.

The results are based on responses from 371 plan sponsors.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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