PERSONNEL MATTERS: 401(k) auto-enrollment popularity grows

By Jerry Geisel, Crain News Service

CHICAGO (Nov. 25, 2014) — More employers are adding automatic enrollment features to their 401(k) and other defined contribution plans, according to a new survey.

In 2014, 68 percent of employers surveyed by Towers Watson & Co. offered an automatic enrollment feature, up from 65 percent in 2012 and 57 percent in 2011.

Employers, though, typically limit automatic enrollment programs to new employees. For example, of the 68 percent of employers with automatic enrollment programs, 47 percent offer it to newly hired employees and 21 percent extend it to all employees.

Under automatic enrollment, employees who don't respond to participation notices are enrolled automatically in a plan unless they notify their employers by a set date that they want to opt out.

The survey, released Nov. 19, also found that while 54 percent of employers offer a Roth feature to their defined contribution plans, that feature is underutilized. Just 8 percent of highly compensated employees and 11 percent of non-highly compensated employees make Roth contributions, the survey found.

Unlike traditional 401(k) plan contributions, Roth contributions are made on an after-tax basis. That means no tax break at the time the contributions are made, but those contributions, as well as investment earnings, can be withdrawn tax-free after a certain number of years.

The results are based on responses from 457 plan sponsors, according to Towers Watson.

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This report appeared on businessinsurance.com, the website of Crain's Business Insurance magazine, a Chicago-based sister publication of Tire Business.

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