Automated plan features in 401(k)s such as auto-enrollment and auto-escalation have become essential tools for boosting employee participation and contribution levels.
Marc Howell and Felix Okwaning, who are both Managing Directors—Enhanced Plan Design at Principal Financial GroupⓇ, share some compelling new research showing employees not only stay in automated features but increasingly expect them, explore budget-friendly strategies to implement them, and discuss how failing to act can create costly delayed retirements. We’ll also cover how SECURE 2.0 is accelerating adoption of automation, and why financial professionals and sponsors should prepare for automated features to become standard in every retirement plan.
Key Insights
Features in 401(k) Plans Can Drive Better Retirement Outcomes
Marc Howell and Felix Okwaning emphasize that automatic enrollment and automatic escalation remain the most effective tools for improving participant savings behavior. These features increase plan participation and deferral rates, leading to higher retirement readiness—especially when combined with target date funds as their plan’s Qualified Default Investment Alternative.
Cost Concerns Are Often Overstated
Many plan sponsors hesitate to implement features due to perceived cost concerns. However, the speakers argue that these assumptions are often exaggerated. When designed strategically, automated features can be cost-neutral—or even reduce costs—by increasing plan scale and efficiency over time.
Behavioral Nudges Require Strategic Plan Design
The speakers highlight the importance of behavioral finance in retirement plan design. Default options, re-enrollment, and ongoing communication can gently steer participants toward smarter decisions. Plan sponsors are encouraged to revisit plan design annually to ensure features align with evolving participant needs and business goals.
See also:
- The power of automated 401(k) plan features
- 3 realities redefining retirement savings
- Cutting the cost of delayed retirement with an employee-first strategy
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