About 62% of businesses with a 401(k) automatically enroll workers into the retirement plan, according to the Plan Sponsor Council of America.
2020 was the first year employers most commonly used a 6% “deferral” rate, rather than 3%.
Automation comes as many workers feel they’re falling behind on savings and as they shoulder more individual responsibility to prepare.
Employers are increasingly putting retirement savings on autopilot for their workers.
About 62% of businesses with a 401(k) plan used automatic enrollment in 2020, up from 60% the year prior and 46% a decade ago, according to the Plan Sponsor Council of America, a trade group.
This feature lets an employer divert a portion of workers’ paychecks into a 401(k), either immediately or after a few months, if that worker hasn’t signed up voluntarily.
Auto-enrollment leverages worker behavior (inertia, in this case) to their advantage. Workers receive a paper or digital notification ahead of time and can opt out — but most do not.
Vanguard Group, one of the largest 401(k) providers, found that 92% of new hires were still saving in the 401(k) plan three years after being automatically enrolled; in plans with voluntary enrollment, just 29% were still saving.
