Study 401(k) Automatic Enrollment Grows

The number of employers offering a 401(k) plan automatic enrollment feature continues to grow, with 44 percent of employers now doing so, up from 36 percent in 2007, a study shows.

The Hewitt Associates study of 190 midsize and large U.S. employers—released Monday, March 3—also found that of the employers that do not offer automatic enrollment, 30 percent said they are very likely to add the feature this year, while 27 percent are somewhat likely to do so.

Automatic enrollment is aimed at those employees who don’t elect or decline to enroll in their employer’s 401(k) plan. Under automatic enrollment, such employees are told that they will be enrolled—with a specified percentage of their salary deferred to the 401(k) plan—unless they object.

Such programs have grown rapidly in recent years for several reasons, including the passage of legislation in 2006 that pre-empted any state laws that could have interfered with the programs.

In addition, as more employers phase out their defined-benefit pension plans, 401(k) plans increasingly have become employers’ sole retirement savings plans. Adding an automatic enrollment feature increases the likelihood that more employees will have at least some retirement plan savings.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.