According to American Century Investments 4th annual plan participant study, there are some interesting attitudes towards automatic enrollment. Many plan sponsors hesitate to institute automatic enrollment, automatic escalation, and re-enrollment for a number of reasons. They tend to be: 1) Too heavy handed, 2) High turnover employees create too many extra accounts and administrative burden, 3) They think employees will complain, or 4) Employees don’t earn enough to justify retirement savings.
For item two, there isn’t really an easy answer under the current rules plans have to operate under. For those employers that site reasons 1, 3 or 4, the following information may be useful. According to the study, 50% of employees think employers should re-enroll all participants. This serves the purpose of refreshing the plan to implement design best practices that likely weren’t readily available when the plan was started. 70% of employees support and would accept auto-escalation, would support re-enrollment to target-date solutions, and think their company should automatically enroll them at a 6% deferral rate. These numbers may seem high but employees are busy with their home & work and likely just want a push on the retirement savings side.
75% of employees would prefer an increase in the plan match versus a raise. 80% would like a slight nudge from their employers to save for retirement and the most telling of all in the survey is that 90% would have told their younger selves to save more! Despite income levels, every American needs to save for retirement. If they start early and save a little bit more each and every year, this becomes an attainable goal. For employers that don’t face the issues of high turnover and have the administrative capacity to adhere to the notification requirements that are placed on them, automatic plans with escalation features will likely be met not with consternation, but with a Thank You!