The “auto” revolution (enrollment, deferral, escalation) in 401k and similar retirement plans is widely regarded as one of the most important innovations recently in saving and investing.
Indeed, it’s received academic and even Nobel Prize-winning validation from Richard Thaler, Shlomo Benartzi and other behavioral economist and experts, leading to better outcomes overall.
And now a new study of DC participant counterparts in the defined benefit space finds that it’s getting through to the general public as well.
The survey from the Center for State and Local Government Excellence and ICMA-RC reveals that nearly half of state and local employees approve of auto-enrollment in defined contribution plans and 77 percent would choose to stay in a plan if auto-enrolled.
The research also finds that among those who would stay in the plan, higher default deferral rates result in respondents settling on a higher contribution rate.
The survey assesses public employee perceptions of auto-enrollment and the impact of varying default deferral rates on an employee’s likelihood to stay in the plan.
It also examines the attitudes and behaviors of public sector employees regarding retirement savings, their progress toward financial security, and issues driving their plan participation.
Key findings
Other report key findings are as follows:
- Nearly half (47%) of respondents approve of auto-enrollment, and 44% approve of employers setting an employee’s default rate. Strong approval of auto-enrollment declines from 24% to 12% when the default is set at 7% rather than1%.
- However, respondents hold divided views on auto-escalation in supplemental plans, with slightly more disapproving (38%) than approving (30%). Approval and disapproval are affected by default rate, with lower approval among those presented with a higher default rate. Nearly four in five participants (79%) are satisfied with their retirement plan.
- A slim majority want more information about general financial issues and retirement planning. About three in ten would welcome an increase in one-on-one in-person communication by employers and financial services companies.