Default rate is higher

The Plan Sponsor Council of America through their annual survey has indicated is that 3% is no longer the most common default deferral rate for automatically enrolled 401(k) plan participants.

The new most common default deferral rate is now 6%. The most common default deferral rate is now 6% of pay (32.9%) rather than the 3% of pay that was the norm since 2006 (29% of plans) when automatic enrollment was added to the Internal Revenue Code that year.

While some naysayers will still object to automatic enrollment, this.  change comes as no surprise to me, as the liability protection given to plan sponsors through the use of a qualified default investment alternative has made automatic enrollment, a great asset for any plan that wants to add automatic enrollment.

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