PSCA finds steady increase in 401k automatic features

Plans with an automatic enrollment feature nearly doubled over the past decade, according to the Plan Sponsor Council of America’s (PSCA) 60th Annual Survey of Profit Sharing and 401(k) Plans. PSCA, part of the American Retirement Association, found 59.7 percent of plans had an automatic enrollment feature in 2016 compared to 35.6 percent in 2007.
The survey found that automatic enrollment was most common in large plans-70 percent of plans with 5,000 or more participants had automatic enrollment versus 34 percent of plans with less than 50 participants. More than half of plans with automatic enrollment were set up for new hires only. The most common reason companies did not use automatic enrollment was because they were satisfied with participation rates, PSCA found.
Three-fourths of automatic enrollment plans automatically increased default deferral rates over time. One-third of these plans automatically increased default deferral rates over time for all participants, one-third offered voluntary escalation, and 12 percent escalated it for all under-contributing participants only.
“Plan sponsors are combating participant inertia by adopting features such as automatic enrollment and auto-escalation to help their employees maximize their retirement plan benefits and reach their retirement goals,” said PSCA Executive Director Jack Towarnicky.
PSCA’s 60th Annual Survey reflects the 2016 plan-year experience of 590 DC plan sponsors.

Source: PSCA press release, March 26, 2018.
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