Automatic enrollment

Automatic Enrollment

An employer-sponsored retirement plan in which the employer is able to enroll an employee without that employee's express authorization. The employer determines what percentage of the employee's salary or wages is contributed to the plan. The employee is able to change this percentage and can even refuse enrollment in the plan, but he/she must do so in writing.

Automatic enrollment.

Your employer has the right to sign you up for your company's 401(k) plan, in what's known as an automatic enrollment. If you don't want to participate, you must refuse, in writing, to be part of the plan.

In an automatic enrollment, the company determines the percentage of earnings you contribute and how your contribution is invested, choosing among a number of potential alternatives. You have the right to change either or both of those choices if you stay in the plan.

References in periodicals archive ?
Plan sponsors and their advisors can conduct automatic enrollment, auto-escalation, and stretch-match formulasin real time with real client datato identify the most beneficial retirement solutions for their business and employees.
Often, these rules have an automatic enrollment feature.
Among its provisions, the PPA enabled the automatic enrollment of workers into 401(k) plans at a default savings contribution rate, as well as the auto escalation of workers' contribution rates on a periodic basis.
Vanguard adds that in late 2015, more than 33% of participants joined their plans under automatic enrollment.
2 percent of 403(b) plans use automatic enrollment, up slightly from last year's 16 percent.
Just 40% of sponsors responding to the 2014 PLANSPONSOR Defined Contribution (DC) Survey use automatic enrollment, and 90.
Some research suggests that the popularity of the automatic enrollment provision increased after the passage of the Pension Protection Act (PPA) of 2006, which removed many of the legal barriers to automatically enrolling eligible employees into DC plans.
While McHugh does not think defined contribution (DC) plan sponsors are as tentative now as they once were about auto-deferral increases offered as an "opt-in" feature for participants, they are more timid about marrying automatic enrollment with an automatic escalation provision.
Automatic enrollment is an effective tool for increasing participation in DC plans because it overcomes individual inertia.
Target-date funds are often designated as the investment default in automatic enrollment plans, but in plans with voluntary enrollment, 48% of participants invest in TDFs.
Vanguard researchers attributed the study's findings to the growing use of automatic enrollment programmes and the widespread shift from conservative default investments toward balanced options, such as target-date funds (TDFs), in many plans.
With a slight change from the original proposals, an employer will be able to delay enrolling a new employee for up to three months before the automatic enrollment rules apply.

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