A majority of 401(k) plans supposedly have an automatic enrollment feature. This is what I read in one of the reports from one of these nation 401(k) conferences.<\/p>\n
It\u2019s an impressive number since it\u2019s only been 2006 that automatic enrollment has been a part of the Internal Revenue Code. Working for a producing third-party administrator at the time, I suggested that we take a supportive approach of adding the feature and I remember arguing with my friend Richard Laurita who insisted that automatic enrollment would be a public relations nightmare when employees would fight having their paychecks garnished. It didn\u2019t materialize as it\u2019s become more popular.<\/p>\n
Getting more people to save for retirement is a good thing and the feature could help with discrimination testing. Where I think more work is needed is that I always saw automatic enrollment as a tool to get participants who are automatically enrolled to actually become actively enrolledby increased deferrals on their own through a thoughtful and engaging process where the participant becomes interested in saving for retirement. \u00a0I always saw automatic enrollment as an opportunity to get participants to eventually defer on their own, kind of like training wheels on a bike. I haven\u2019t seen that happen because I still think many plan sponsor and providers fail to really engage and interest plan participants.<\/p>\n
Until we improve the enrollment and education meeting process, I don\u2019t think automatic enrollment will be used to its full potential.<\/p>\n
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