Auto-Enrollment Bumps 401(k) Plan Participation
How you design your 401(k) plan can increase participation while helping employees with retirement readiness. One of the tools you can use is auto- enrollment to automatically enroll employees in your 401(k), often at 3%.
While there’s some debate about whether that’s enough and what the number should be, as the Fidelity chart below demonstrates, auto-enrollment consistently increases plan participation. If you aren’t already doing so, consider auto-enrolling employees at your company’s match rate to help them maximize savings.
Employees Like Auto-Enrollment
According to the Fidelity study, 90% of employees that employers auto-enrolled did not opt out. Further, in a recent American Century survey to plan participants, 70% of respondents said they believe auto enrollment should start at 6%. In addition, two out of three employees said employers should auto- enroll employees at a set percent and then increase it automatically each year. Target date funds are also popular as the default investment for auto enrollment. These funds automatically rebalance as the target date approaches, which helps ensure an employee’s 401(k) balance is diversified.
Congress Supports Auto-Enrollment
The House Ways and Means Committee recently proposed a “SECURE Act 2” bill, and the Senate introduced similar legislation earlier this year. With automatic enrollment in the proposed bill, it confirms that Congress is refocusing on retirement plan initiatives in 2021. The bill also features a “savers credit” in which certain lower income individuals would receive additional tax breaks when they save for retirement. And it includes a provision that would create a national database to make it easier for employees to find their lost retirement accounts.
If you don’t yet have auto-enrollment in place, consider adding it to boost retirement plan participation and to encourage employees to save for retirement. It’s also important to educate employees on the benefits of saving for their future through the convenience of an employer-sponsored plan. If you do have auto-enrollment, is it at an appropriate percentage to make a difference for plan participants?
Consider Consulting With the Retirement Plan Solutions Team
Please feel free to reach out to the Mariner Wealth Advisors’ Retirement Plan Solutions team. We can help with plan design, review your auto-enrollment option and default investment, as well as provide educational resources, including webinars and online tools, for plan participants.
*Participation data as of Q4 in all years. Updated annually by Fidelity.
“Building Financial Futures,” 3rd Quarter 2020, Fidelity.
“8th Annual Survey of Retirement Plan Participants,” 2020, American Century.
“SECURE Act 2.0 Legislation Introduced—And Wow!” 401kspecialistmag.com.
This article is limited to the dissemination of general information pertaining to Mariner Wealth Advisors’ investment advisory services and general economic market conditions. The views expressed are for commentary purposes only and do not take into account any individual personal, financial, or tax considerations. As such, the information contained herein is not intended to be personal legal, investment or tax advice or a solicitation to buy or sell any security or engage in a particular investment strategy. Nothing herein should be relied upon as such, and there is no guarantee that any claims made will come to pass. Any opinions and forecasts contained herein are based on information and sources of information deemed to be reliable, but Mariner Wealth Advisors does not warrant the accuracy of the information that this opinion and forecast is based upon. You should note that the materials are provided “as is” without any express or implied warranties. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.
Mariner Wealth Advisors (“MWA”), is an SEC registered investment adviser with its principal place of business in the State of Kansas. Registration of an investment adviser does not imply a certain level of skill or training. MWA is in compliance with the current notice filing requirements imposed upon registered investment advisers by those states in which MWA maintains clients. MWA may only transact business in those states in which it is notice filed or qualifies for an exemption or exclusion from notice filing requirements. Any subsequent, direct communication by MWA with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For additional information about MWA, including fees and services, please contact MWA or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you invest or send money. Securities Offered through MSEC, LLC, Member FINRA & SIPC, 5700 W. 112th Suite 500, Overland Park, KS 66211.