Drive participation and improve retirement readiness with auto enroll

Help your employees take critical steps toward retirement readiness with automatic enrollment.

Since 2013, voluntary enrollment for full-time workers in defined contribution plans has remained largely unchanged — only moving from 46%1 to 48%2 during this time. The reluctance of employees to take advantage of their employer’s plan may lead to retirement-eligible employees remaining in the workplace because they have failed to save enough to retire.

How can we best help today’s workers achieve retirement readiness? One plan design trend — automatic enrollment — is increasing across companies of all sizes and industries and proving to be a solution that makes a difference in plan participation.

The upward trend of automatic enrollment

The automatic enrollment (auto enroll) plan feature allows you to “enroll” an eligible employee in your retirement plan, unless the employee affirmatively elects to opt out. As plan sponsor, you choose the default contribution rate as well as the default investment option - typically a stable value, money market or target date fund. You may also determine if designating a qualified default investment alternative (“QDIA”) for automatic enrollment contributions is appropriate for your plan.

Auto enroll is fairly easy to set up, can improve plan participation rates and encourages employees to save for retirement as soon as they are eligible. As an increasingly popular plan design feature, auto enroll is helping plan sponsors increase participation — regardless of company size or industry.

In fact, auto enrollment has become more of the norm, especially among larger plan sponsors. While offered at just over half (52%) of mid-size to large companies in 2009, auto enroll was offered by 73% of these companies in 20173. Auto enroll is also on the rise across non-profit organizations – with 16% of organizations offering in 2014, rising to 21% in 2016.4

 

Are all auto-enrollment features created equally?

 

Compared to a national survey of automatic enrollment plans, Voya’s average percentage of participants contributing to the plan exceeds the survey average by 6 percentage points.  While it’s difficult to pinpoint the single factor driving this performance, we believe it’s a combination of:

  • An enhanced digital enrollment experience driven by key insights and inputs from the Voya Behavioral Finance Institute for Innovation.
  • The impact of Voya’s myOrangeMoney® online educational experience in helping individuals understand the importance of saving today for a better retirement future.
  • The impact of ongoing education paired with well-timed communications.

 

American workers are in favor of plan auto features

In spite of the success of auto enroll, some plan sponsors are reluctant to impose another standard deduction on their workers’ checks. Yet, research suggests American workers are in favor of automatic enrollment and other auto features alike, especially Millennials who make up 35% of the workforce.

Costs of auto enroll vs. costs of delayed retirement

While auto enroll offers a range of attractive benefits for employers, one of the most common objections to this type of automatic feature is the cost. Plan sponsors are especially concerned about increased employer match costs resulting from the spike in participation. Assessing this cost must be weighed against the immediate financial and long term overhead costs associated with workers delaying retirement.

On one front, delayed retirement drives the cost of labor up. Because older workers are more experienced, they typically demand higher salaries and compensation. Employers must also plan for the increased disability claims, group health, and increased cost of benefits associated with an older workforce. As a matter of fact, the LIMRA Secure Retirement Institute found approximately 73% of employers have planned for the increased cost of benefits for older workers.6

Because the first step is often the hardest, you can help your employees take this critical step toward retirement readiness by implementing auto enroll for your plan.

 

Reach out to your Voya relationship manager to learn more about how automatic features like auto enroll and auto escalation can benefit the health of your plan and the retirement readiness of your employees.   

Check back here often for additional insights.   

 

 

 

 

 

 


Disclosures: 
1 Bureau of Labor Statistics, March, 2013 National Compensation Survey: Employee Benefits in the United States 2 Bureau of Labor and Statistics, March 2017 Retirement benefits: Access, participation, and take-up rates report 3 The Willis Towers Watson 2017 Defined Contribution Plan Survey. The results are based on responses from 349 large and midsize U.S. companies that sponsor a defined contribution retirement plan. 4 Data from 608 non-profit organizations conducted by the Plan Sponsor Council of America (PSCA), 2017 5 J.P. Morgan Plan Participant Research 2018. The online survey of 1295 plan participant was conducted in January, 2018 6 LIMRA Secure Retirement Institute – Employers Prepare for Higher Benefits Costs from Older Workers, October 2015
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