Should auto-enrollment be required? The answer is clearly “yes,” according to Alicia Munnell, director of the Retirement Research Center at Boston College. Though participation rates saw a major boost after the 2006 PPA, those spikes in participation rates have leveled off, according to Munnell — prompting some to call for new legislation.
While most industry experts are in favor of auto-enrollment, others are more cautious, citing several concerns. One question is deferral rates — which, to satisfy the PPA’s non-discrimination safe harbor, could cost more than many companies can afford or are willing to pay. Setting deferral rates too low without auto-escalation can set a participant up for failure and ruin the economics of the plan.
Providers generally price a plan based on assets, but costs are based on the number of participants. Until plan sponsors are ready to pay for the cost of the plan — and don’t hold your breath on that — or providers move to gross-to-net pricing, mandatory auto-enrollment seems unrealistic.
