CFOs Say Auto Enrollment Biggest 401(k) Change after PPA

Nearly four in 10 (38%) of the chief financial officers (CFO) in a recent survey said their firms expected to add 401(k) automatic enrollment programs as a result of the recently enacted Pension Protection Act (PPA).

A news release reported that about 22% of the CFOs said they will be offering investment advice while a like number said they will add Roth IRA options. The “CFO Outlook Survey” is conducted quarterly by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business.

Eighty-nine percent of responding firms in the latest poll offer 401(k) plans. As a result of the PPA, 28% have made or plan to make changes based on the law’s provisions, while another 33% have not made a decision yet and 39% anticipate no change in the near term, the press release said.

According to the announcement, a third of the CFOs reported that the most common 401(k) default investment options for auto enrollment will most likely be money market funds (33%), though rebalancing asset allocation funds are a close second at 29%, the news release said. The Guaranteed Investment Contract (GIC) will be the most likely default option at only 4% of the companies. However, the survey, which included the responses of 171 corporate CFOs, was conducted during the week of September 18 – before the publication of the Department of Labor’s proposed regulations on qualified deferral investment alternatives (see DOL Unwraps New Default Investment Guidelines).

Automatic enrollment has been a major issue in the retirement planning community in recent months – particularly after the passage of the PPA and the recent release by the Department of Labor (DoL) of proposed rules governing default investment options.