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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Brooks Herman, vice president of data and research at Strategic Insight, the parent company of PLANSPONSOR, in San Diego, says, “We see the current negative flow numbers shrinking due to the growth of automatic enrollment.” The Philippine Star (@PhilippineStar) December 10, 2018 Automatic enrollment, better access
Automatic enrollment increases plan participation, and increased plan participation helps employers meet the "nondiscrimination" tests of the Internal Revenue Service.
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. Also, from 2010 to 2015, median balances fell 2%, but average balances grew 22%.
Just 16.2 percent of 403(b) plans use automatic enrollment, up slightly from last year's 16 percent.
Automatic enrollment is often expected to increase employer compensation costs as previously unenrolled workers start to receive matching retirement plan contributions, but researchers have found this not to be true.
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.
* 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.

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