Auto Enrollment Has Been Quickly Adopted

A new study provides more evidence that auto plan features – particularly auto enrollment at plans with $10 million or more in assets – have quickly become the rule rather than the exception.

The Spectrem Group says that, in addition to auto enrollment being offered by half of all plan sponsors, half of the remainder of sponsors say they will definitely or very likely add it within the next year to 18 months.

Survey responses suggest that within two years, automatic enrollment will be in place at more than 80% of plans with $10 million or more in assets, a news release said. Among those who currently use automatic enrollment, 39% limited the program to new hires when they began the program and 61% included all employees in it.

Spectrem researchers said auto enrolled plans enjoy significantly higher participation and that the trend is only expected to become more pronounced. “Given time to take full effect (and reflecting the experience of sponsors who implemented automatic enrollment several years ago), we expect overall participation rates at plans using the approach to close in on or exceed 90% over time,” Spectrem said.

Default Funds
When asked about default funds, 58% of sponsors with automatic enrollment or likely to implement it opt for a fund focused on protection of principal. Another 22% prefer asset allocation funds (whether lifestyle or target date focused) and 11% prefer managed accounts, according to Spectrem.

Those plan sponsors who do not currently offer a stable value option are more likely to prefer money market funds, while those who do offer a stable value are more likely to prefer that option, the survey found.

Deferral Rate Increases
Spectrem researchers also found that about half of those sponsors who do offer or are likely to offer automatic enrollment say they have or will implement automatic deferral rates increases also. Among the remainder, half say they are likely to adopt automatic deferral rate increases.

Overall, 56% of plan sponsors say they have entered or will enter into an eligible advice arrangement as sanctioned by the Pension Protection Act (PPA). Among respondents who have not already decided against offering investment advice, 40% say they would prefer the computer-based advice approach set out in the PPA and 60% would opt for the flat fee approach.

Plan sponsors are split regarding whether and how much of the cost of the investment advice program will be passed through to the participants. Overall, 30% say they will charge the entire cost to participants, 39% say they will subsidize the cost but charge participants a portion and 31% say they will make the advice service available to participants at no cost to them.

More information is at