Auto-Enrollment in Government Plans Grows Big, But Auto-Escalation Lags: Report

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Adoption of automatic enrollment features in state and local government defined contribution (DC) retirement plans has expanded substantially during the past 15 years, finds a new report from MissionSquare Research Institute.

Seventeen states and Washington D.C. now require or permit some form of auto-enrollment, the report found. But few state and local governments have adopted automatic escalation, as government officials may be hesitant to move forward without explicit statutory authority.

In the private sector, however, the report notes automatic enrollment is becoming a standard practice, with two-thirds of DC retirement plans incorporating automatic escalation.

The findings are outlined in the new report, “Automatic Enrollment and Automatic Escalation in State and Local Government Defined Contribution Plans,” prepared by Paula Sanford, Ph.D., Senior Public Service Associate at the University of Georgia, and released during National Retirement Security Month. The report offers automatic enrollment and escalation case studies for public sector retirement plans in California, Georgia, Kentucky, Missouri, Oregon, and Virginia.

“Incorporating automatic enrollment and escalation features into public sector DC retirement plans now is imperative”

MissionSquare Retirement’s Deanna J. Santana

“Relying solely on their pension for financial security during retirement is no longer a viable option. Incorporating automatic enrollment and escalation features into public sector DC retirement plans now is imperative,” said Deanna J. Santana, the Acting CEO and President of MissionSquare Retirement. “Supplementing their pensions with DC plan savings helps public service employees attain financial security after a career dedicated to serving our communities.”

Santana highlighted that jurisdictions already implementing automatic enrollment and escalation features are witnessing considerable success in augmenting employees’ retirement savings. “This success is particularly critical given the upward trend in retirement costs and life expectancy.”

The report notes that participation in both automatic enrollment and escalation features remains voluntary, in that the employee retains the right to leave the plan or change contributions.

The state and local jurisdiction case studies in the report offer five lessons learned:

SEE ALSO:

• Automatic Enrollment Adoption Grew to 85% in 2022: T. Rowe Price

• Hawaii Approves State-Run IRA, but Minus Auto-Enrollment

• IRI Wants Virtually All Employees Auto Enrolled into Retirement Plans

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