Automatic enrollment in employer-sponsored 401(k) plans can boost participation in the programs – and potentially increase retirement savings.
And in a world where pensions are a rarity, helping your employees save for retirement will be a very valuable employee benefit.
Automatic enrollment is as it sounds: upon hiring, a new employee is immediately entered into a defined contribution plan (usually a 401k), with a set percentage of the employee’s salary automatically deducted.
There is evidence that auto enrollment has taken hold with corporate retirement plan sponsors as well as participants.
In a recently released report on the savings habits of its more than four million participants in defined contribution plans, Vanguard found that 63 percent of new plan participants were now being automatically enrolled into its plans. Overall, automatic enrollment has increased 50 percent across Vanguard’s defined contribution plans over the last six years.
In a recent interview with Leader’s Edge magazine, Plexus Financial Services Practice Leader Allison Winge suggested that automatic enrollment was here to stay.
“From the employee standpoint it’s really, ‘Make it easy for me,' ” Winge said.
Auto enrollment, of course, is just one of the many steps corporate retirement plans can take to aid plan participants. But it’s not the only one. An appropriate plan design is essential, too.
Nevertheless, the act of automatic enrollment can get plan participants into the savings game. And maybe that’s just the nudge needed to get them down the right path.
Disclaimer: Plexus Financial Services does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable; we cannot assure the accuracy or completeness of these materials.
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