Auto-enroll, but at what rate?

As a plan sponsor, one of your most important duties is to evaluate all aspects of the retirement plan. Frequently this includes investments used, vendors hired, plan communications, and company match. But what about the main drivers of success?

How you have participants enter the plan (via affirmative election or automatic enrollment) and at what rate you default them are key. In the early days of auto-enrollment & auto-escalation, employers frequently set their auto-enrollment at 3%. While this was better then nothing, it wasn't the most effective way to design a plan. What is the match rate if one is offered? What is the average and median income? What type of savings rate do employees have?

According to the recent "How America Save's" report from Vanguard, the default auto-enroll rate across their plans is now 4% or greater for 60% of plans. A decade ago, that number was 35%. Clearly plan sponsors are seeing that plan design can drive results for employees when properly evaluated.