401(k) plan automatic enrollment (or auto-enrollment) is the process by which employees become participants in a 401(k) plan immediately upon meeting eligibility requirements. Rather than electing to contribute to the plan via salary deferral and payroll deduction, workers must opt-out of the plan. Plan sponsors typically begin the contribution amount at 3% of the employee’s total salary.
Nobel Prize-winning research in behavioral economics found that such an opt-out, rather than opt-in, strategy effectively encourages retirement saving by employees. First introduced with the passage of the Pension Protection Act of 2006, it gave companies the ability to automatically enroll employees in their 401(k) plans, significantly increasing plan participation rates in the time since.