With the growth of auto-plan features, plan sponsors are subject to many misconceptions and fears that prevent them from doing the right thing for their employees. Missouri-based Pension Consultants Inc. identifies the seven biggest misconceptions about auto features, and provides solid answers that plan advisors can use with reluctant clients:
• Paternalism — 98% of auto-enrolled employees were happy with the service; even 79% of those who opted out thought it was a good thing.
• Match expense — Most HCEs are already in, and the expense is minimal at the start since account balances are still small.
• Employees won't take responsibility — Helping employees get started helps them see the value of their retirement plan.
• Extra work and expense do not help the company — Auto features limit turnover and help with discrimination testing.
• Administrative nightmare — It’s actually easier to auto-enroll everyone uniformly rather than individually.
• QDIA increases fiduciary liability — See the Pension Protection Act of 2006.
• Impact on employees is limited — See compounding interest and auto escalation.
