The number of 401k and similar defined contribution plans with an automatic enrollment feature nearly doubled over the past decade, according to the Plan Sponsor Council of America’s (PSCA) 60th Annual Survey of Profit Sharing and 401k Plans.
PSCA, which announced last November that it joined the American Retirement Association, found that “59.7 percent of plans have an automatic enrollment feature in 2016 compared to 35.6 percent in 2007.”
“The survey found that automatic enrollment is most common in large plans—70 percent of plans with 5,000 or more participants have automatic enrollment versus 34 percent of plans with less than 50 participants,” wrote PSCA’s Hattie Greenan recently. “More than half of plans with automatic enrollment are set up for new hires only. The most common reason companies do not use automatic enrollment is because they’re satisfied with participation rates.”
She noted that three-fourths of automatic enrollment plans automatically increase default deferral rates over time.
“Plan sponsors are combating participant inertia by adopting features such as automatic enrollment and auto-escalation to help their employees maximize their retirement plan benefits and reach their retirement goals,” PSCA Executive Director Jack Towarnicky, added in a statement.
Other positive trends spotted by the organization include:
- Plan sponsor contributions swelled to an average of 4.8 percent.
- The availability of Roth 401ks doubled in the last 10 years to a little over 63 percent.
- The number of target-date funds offered rose to around 75 percent of plans, and on average, 22.2 percent of participants’ assets are now being allocated here.
However, one number appears to be relatively stagnant. Average salary deferral rates are holding fast around 6.8 percent, with most default deferral rates having been set around 3 percent of pay.
PSCA’s 60th Annual Survey reflects the 2016 plan-year experience of 590 DC plan sponsors. The full survey is available to order as a hard-copy bound book or a PDF. It contains 182 tables of data covering topics such as Roth IRAs, employee eligibility, and investment advice.