The Total View - (Page 26) Offering automatic enrollment can help increase the number of employees participating in a retirement plan. However, participating employees often enroll at lower salary deferral percentages. Therefore, while they are contributing, it is generally not at rates that may be necessary for a more comfortable retirement. Automatic enrollment combined with automatic step up deferral features allows employees to be enrolled in the retirement plan at a more comfortable initial deferral rate. The automatic step-up deferral feature allows participants’ deferral rates to slowly increase over time to reach a more reasonable rate. Average Participation by Enrollment Selection 80% –––––––––––––––––––––––––––––––––––––––––––––––––– 75% 75% –––––––––––––––––––––––––––––––––––––––––––––––––– 72% 73% 70% –––––––––––––––––––––––––––––––––––––––––––––––––– 68% 68% 68% 65% –––––––––––––––––––––––––––––––––––––––––––––––––– 60% –––––––––––––––––––––––––––––––––––––––––––––––––– 55% –––––––––––––––––––––––––––––––––––––––––––––––––– 50% –––––––––––––––––––––––––––––––––––––––––––––––––– Auto Enrollment* Standard Enrollment 2004 2005 2006 Participation continued to increase with use of an automatic enrollment feature. * Have adopted auto enrollment for newly hired employees. Fast Fact Lifestyle, lifecycle, and asset allocation style investment options were the most common default investment for automatic enrollment, followed by Stable Value funds.3 2 Proto Plans Using Auto Enrollment by Salary Deferral Default Rates 2006 40% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 35.1% 35% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 30% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 25.7% 25% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 21.3% 20% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 15% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 10% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 6.7% 6.3% 4.1% 5% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 0.2% 0.2% 0.1% 0.1% 0.1% 0% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 1.0% 2.0% 2.5% 3.0% 3.5% 4.0% 5.0% 6.0% 7.0% 8.0% 15.0% Profit Sharing Council of America 49th Annual Survey 3 2006 PLANSPONSOR Magazine DC Survey The most common default salary deferral percentage used for automatic enrollment was 3%. 26
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