Automatic FeaturesJanuary 18, 2018 | For Your Business
From our recent Plan Sponsor survey, we learned that participation rate was the number one method for measuring plan design success and improving participation rates was one of the top plan sponsor priorities. Along with participant education and employer engagement, studies have shown that implementation of automatic plan features is one of the best ways to increase participation.
In our survey, we asked how many Plan Sponsors offer an automatic plan feature. Though 49% responded positively, many Plan Sponsors were not considering adding an automatic feature such as auto enrollment or automatic increase to help boost participation. The top reasons for this included that employers were unaware of automatic feature options or uncertain of how employees would benefit or react to the implementation of this plan feature.
Automatic enrollment programs are in 50% of retirement plans according to The Profit Sharing Council of America’s 58th Annual Survey, reframing the participant’s perspective towards retirement saving. With opt-out rates below 6% in the majority of plans, employers can be more comfortable that participants embrace automatic features as doing the right thing. Additionally, in a previous OneAmerica Participant Study survey, more than half of the respondents indicated they would be in favor of an automatic annual increase, while only one percent would stop participating.
Whether your company is looking to start with these features or you are looking at making a bolder move in helping your employees prepare for retirement, here are actions to consider for all size plans:
1. Is automatic enrollment or automatic increase right for your company? Determine if and what features below are suitable for your plan and learn how your employees may benefit from these plan design features.
2. If you have a traditional automatic enrollment rate of 3% for new hires only, is it time to consider increasing the deferral rate to a higher amount, 6%-10%, retroactive for all employees?
3. If you have a traditional increase schedule of 1% up to 10% and have your employees “opt in”, is it time to consider changing this to “opt out” and increasing the cap from 10% to 15%?
4. Review industry statistics on automatic features, in the Perspectives Brochure section on automatic enrollment.