Adoption of Auto Plan Features Stalled

Only 16% of employers without automatic enrollment report that they are either “very likely” (4%) or “somewhat likely” (12%) to add it. Just over one in ten (11%) employers without automatic escalation report that they are either likely or somewhat likely to add that feature within the next 12 months.  

In addition, among employers that have automatically enrolled only new hires, only 10% report that they are likely to expand automatic enrollment to include all non-participating eligible employees.  

Nearly all employers surveyed (94%) indicated they are at least somewhat familiar with automatic enrollment in 401(k) plans; however, less than half (42%) have adopted it for their own plans. Even fewer (28%) report that their plans use automatic escalation.  

Respondents said information on legal and liability issues (76%), best practices (72%), and impact on non-discrimination testing (70%) was or would be the most helpful in deciding whether to automate plan features.  Employers also cited the helpfulness of basic information about automatic enrollment (67%), information about implementation and maintenance (67%), and guidance on employee communications (66%).  

The major reasons employers cited for offering automatic features were: 

• It helps employees save more for retirement (74%); 
• It is easier to pass non-discrimination testing (49%); and  
• It demonstrates that we are a socially responsible company (35%). 

Concern that employees would not like automatic enrollment (30%), costs (20%), contentment with the status quo (14%) and lack of information (10%) were reasons cited for not offering automatic enrollment. Concern that employees would not like it (66%), or would find it confusing (52%), and concern about matching contribution costs (35%) were cited as reasons for not adding automatic escalation. 

Fifty-eight percent of employers that use automatic enrollment report that they only automatically enroll new hires, while 35% automatically enrolled all non-participating eligible employees. Reasons cited for not automatically enrolling all non-participating eligible employees included concern that the employees would not like it (21%), a belief that enrollment should be the employee’s decision (15%), contentment with the status quo (13%), administrative challenges (9%), and the state of the economy (8%).