By Pension and Benefits Editorial Staff
Enrolling new employees automatically into retirement plans increases plan participation dramatically, according to recent research from The Pew Charitable Trusts. The study found that plans that auto-enroll have participation rates that exceed 90 percent, compared with rates in the 50 percent range for plans in which workers must opt-in.
Survey respondents without a retirement plan at work were asked whether they would sign up if an employer-sponsored plan were offered. Separately, they were asked if they would opt out of a plan if automatically enrolled. Of those who said they definitely or probably would not sign up for an employer-sponsored plan on their own, 55 percent said they would stay if automatically enrolled. Not surprisingly, a large majority (85 percent) of those who said they would sign up for a plan if offered also said they would stay in if automatically enrolled.
To examine what motivates workers to participate, the survey asked those who had a plan at work but were not participating what would encourage them to join. They also were asked if they would opt out of an employer-sponsored plan if automatically enrolled. Large majorities said they would not opt out if automatically enrolled. Further, the study found that there was no statistically significant difference among those who said they would remain enrolled, no matter the motivator, implying that automatic enrollment is a cost-effective approach to increasing participation regardless of the pressures workers faced or inducements from which they thought they would benefit.
Finally, those respondents without a plan at work were asked about the most important barriers they faced in saving for retirement—aside from having no way to save on the job. More workers who say they are unwilling to sacrifice quality of life would opt out compared with those who are saving for education, although significant majorities of each would, if enrolled automatically, remain in the program regardless of the perceived obstacles to retirement saving.
Source: Pew Charitable Trust Survey.
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