The problem with auto escalation

I worked at a place where employees were passive-aggressive and never said anything about how things bad are, except when they stopped supplying free milk for the coffee machine. That was always my point in my fierce debate on automatic enrollment with the greatest salesperson I ever knew, Richard Laurita.

When the Pension Protection Act of 2006 was signed into law, it codified automatic enrollment and I became supportive of it because it finally held plan sponsors harmless as long as they invested those automatic enrollment assets in a QDIA. Since we were working at a third-party administration (TPA) that had a side advisory practice, I thought this was a good idea to push. Rich, being a plan sponsor’s best friend as a salesman, thought it was a bad idea because he believed (as someone who always expressed his opinion) that people would cause headaches for the human resources staff, by complaining. I said at 3%, people won’t notice. I think studies have shown I was right, I mean that automatic enrollment works. Auto escalation, I don’t think works that well because like with anything else, too much of a good thing is bad and I believe that auto-escalation, will get to the point where an employee will no longer be passive-aggressive because they will no longer be able to afford being automatically enrolled.

This entry was posted in Retirement Plans. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *