Less than 10 Percent of Small Biz 401(k)s Use Auto Enrollment

Her small business didn't auto enroll and she's not happy about it.

Her small business didn't auto enroll and she's not happy about it.

Only 8.71 percent of small 401(k) plan sponsors automatically enroll employees that fail to make an affirmative enrollment election, according to a new study from Employee Fiduciary, LLC., a 401(k) plan provider for small businesses based in Mobile, Alabama.

The study summarizes the different contribution types used by 2,767 401k plans, averaging 25 participants and $947,000 in plan assets. The study is intended to help small businesses pick the best 401k plan design for its employees given their unique needs.

“401(k) plans are not a one-size-fits-all proposition,” says Eric Droblyen, president and CEO of Employee Fiduciary. “Small businesses have nearly countless 401(k) options. During the plan design process, a company chooses amongst these options based on their 401(k) objectives and budget. This process can have a material impact on a company’s bottom line, so it’s important for 401(k) fiduciaries to take it seriously. It’s not uncommon for a company to save tens of thousands of employer contribution dollars by choosing one design over another and yet still meet their 401(k) plan goals.”

The 401(k) plan study summarizes a number of companies that use safe harbor, automatic enrollment, Roth, matching and profit sharing contributions and how these contributions are combined to meet company needs. Some key findings of the study include:

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