Posted on 15 July 2009
By Mark Miller
Fidelity Investments reports a 70 percent increase in workplace retirement plans adding auto-enrollment feature since 2007, a figure representing a survey of the company’s client base. Fidelity reports that 52 percent of auto-enrolled participants were between the ages 20 and 34 – meaning this feature plays a role in helping younger workers kick-start their retirement savings.
The Pension Protection Act of 2006 contained provisions designed to encourage companies to add auto-enrollment as a way to boost plan participation and long-term retirement security for Americans. Only 56 percent of American workers are active participants in a defined contribution plan, according to Retirement USA. That’s partly due to lack of access; about 35 percent of American workers don’t have access to a 401(k) plan at work; most work for smaller businesses that don’t offer plans due to cost. Choice is another factor; 15 percent of workers who have access to a 401(k) decline to participate, due either to inertia or because they need the money for immediate needs.
Other key findings from the Fidelity survey:
- Over 50 percent of plans with over 25,000 or more participants have adopted auto enrollment.
- Data also showed that the majority (56%) of participants that were enrolled automatically made less than $40,000 a year, giving workers with lower salaries a way to save for their retirement.
- Of the workers eligible for automatic enrollment, only one in 10 proactively opt out of the plan.