Automatic 401 (k) Enrollment: Retirement Cure-All or Bltter Pill?

Abstract

Automatic enrollment in a 401 (k) plan, also known as "negative election," is not a panacea and is not right for every plan sponsor. However, for some plan sponsors with low employee participation in the 401(k) plan, high turnover, or problems passing the discrimination tests, implementing automatic enrollment could be a beneficial move. As in any effective program that a plan sponsor would like to implement in a company, anticipating employee reaction and developing a clear communications strategy that addresses employee issues are essential, advises the author. To illustrate her point, she highlights in different case studies the strategies of two companies that have approached their low 401 (k) participation and what they did to improve it. While automatic 401(k) enrollment is not necessarily the ideal cure for getting employees to participate in their companies' 401(k) plan, it can help solidify the relationship between employee and employer while communicating to workers the importance of saving for their retirement.