Implementation and appreciation of the value of automatic enrollment is increasingly widespread among employers. Several recent studies have found that more employers are using it, although one points out that enthusiasm about auto features is not universal.
In a recent study of 100 employers with DC plans, Aon Hewitt found that 70% have automatic enrollment. And Vanguard found that among 460 employers it studied, even more do — 75% at hiring, and 95% in the first three months.
Vanguard found that among employers that put auto enrollment in place, participation was 91%. That’s more than double the 42% participation in employers for which plan participation is voluntary.
Contributions
Employers that are more aggressive about fostering greater retirement savings by their employees — those that set a default contribution rate of at least the full company match — amounted to 41% in Aon Hewitt’s study. And 7% of those set a default rate above the full company match. Even more aggressive, 20% in Vanguard’s study set a deferral cap between 12% and 25%.
A majority in Aon’s study set a default rate below the company match. Eight percent, however, also include escalation of contributions as an opt-in feature of the plan. That may not be a bad idea; Vanguard found that 80% of plan participants who are automatically enrolled increase the contributions they make to their retirement accounts.
Not so Fast
Callan Associates’ “2015 Defined Contribution Trends” study throws a little cold water on the enthusiasm. Though Callan found that a majority of the plans it studied have auto enrollment, it also found that among the 144 plans it studied, auto enrollment largely applies to new employees only, BenefitsPro reports. Furthermore, just one-third had instituted auto enrollment and auto escalation, and only 12.8% plan to put it in place in the future.
So why have employers not implemented auto enrollment? Cost was one reason cited in Aon and Callan’s studies. Others included concern about employee reaction to automatic enrollment and the desire to avoid small account balances in the plan. In addition, some told Callan Associates that they did not adopt auto enrollment because it was a low priority or because they considered it unnecessary.
In a recent study of 100 employers with DC plans, Aon Hewitt found that 70% have automatic enrollment. And Vanguard found that among 460 employers it studied, even more do — 75% at hiring, and 95% in the first three months.
Vanguard found that among employers that put auto enrollment in place, participation was 91%. That’s more than double the 42% participation in employers for which plan participation is voluntary.
Contributions
Employers that are more aggressive about fostering greater retirement savings by their employees — those that set a default contribution rate of at least the full company match — amounted to 41% in Aon Hewitt’s study. And 7% of those set a default rate above the full company match. Even more aggressive, 20% in Vanguard’s study set a deferral cap between 12% and 25%.
A majority in Aon’s study set a default rate below the company match. Eight percent, however, also include escalation of contributions as an opt-in feature of the plan. That may not be a bad idea; Vanguard found that 80% of plan participants who are automatically enrolled increase the contributions they make to their retirement accounts.
Not so Fast
Callan Associates’ “2015 Defined Contribution Trends” study throws a little cold water on the enthusiasm. Though Callan found that a majority of the plans it studied have auto enrollment, it also found that among the 144 plans it studied, auto enrollment largely applies to new employees only, BenefitsPro reports. Furthermore, just one-third had instituted auto enrollment and auto escalation, and only 12.8% plan to put it in place in the future.
So why have employers not implemented auto enrollment? Cost was one reason cited in Aon and Callan’s studies. Others included concern about employee reaction to automatic enrollment and the desire to avoid small account balances in the plan. In addition, some told Callan Associates that they did not adopt auto enrollment because it was a low priority or because they considered it unnecessary.
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