The Total View - (Page 25) Automatic Enrollment is Catching on Scores of plan sponsors today are choosing automatic enrollment because it minimizes the anxiety associated with enrollment, as well as the confusing process of choosing among numerous investment options. In 2006, the number of retirement plans using automatic enrollment doubled: more than 1,100 plans chose to automatically enroll employees. According to the Profit Sharing Council of America, 17.5 percent of all 401(k) plans have automatic enrollment, and the feature is most common within large plans.2 Although plans that automatically enroll participants have lower average account balances than plans that do not automatically enroll participants, it is important to note that the concept is relatively new in the industry. Those participants that were automatically enrolled in recent years have not had a large amount of time to build up the account balance. The standard average salary deferral rate for individuals automatically enrolled in retirement plans was lower than the average deferral rate for self-elected enrollees. The average deferral rate for participants that were automatically enrolled remained unchanged from 2005 at 3.3 percent in plans with services provided by The Principal. The most common deferral percentage used in the industry of 3 percent.2 Participation rates were higher for those plans that automatically enroll participants. A majority of plans have elected to only automatically enroll new employees and are not enrolling existing employees that have opted to not participate in the retirement plan. Salary Deferral Rates 25
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