If auto enrollment hasn’t yielded a major boost to your firm’s 401(k) plan participation rates, there’s no reason to hit the panic button just yet.
After the feds gave the go-ahead for companies to automatically enroll staffers in retirement plans, many expected participation rates to soar.
That hasn’t been the case.
According to a recent Deloitte Consulting study, the number of companies who have added auto enrollment went from 23% in 2006 to 42% today.
However, employee participation rates have remained virtually the same — 75% in 2006, compared to 76% today.
So, if top execs are less-than-thrilled that participation rates haven’t exactly mirrored auto-enrollment rates, here is some key info to pass along:
- Some employees always opt out once they’re enrolled
- There’s a significant lag time between starting auto enrollment and a participation boost, and
- Turnover affects participation rates.
Another advantage of auto enrollment: It has the greatest positive long-term impact on the participation rates of Generation-Y employees (those born after 1980). A big plus considering many studies confirm that these staffers are the most reluctant group to participate in 401(k) programs.