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
twitter.com/hG5qo16ow9 The Philippine Star (@PhilippineStar) December 10, 2018 Automatic enrollment
, better access
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
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.
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.