Even in the face of research and logic that shows how auto enrollment and auto escalation improve plan outcomes, plan sponsors are still reluctant (free registration required). In a survey of 118 plan executives (mostly from larger plans) by the Defined Contribution Institutional Investor Association (DCIIA), 69% indicated that they were unlikely to offer auto escalation. This rate is down from 84% in 2010. Other findings include:
• Plans using auto enrollment increased to 56% from 44% over a two year period.
• Participation in auto enrolled plans grew from 69% to 81%.
• Plans deferring at 4% for auto enrollment increased to 47% from 39%.
• There was only a 1% increase in the use of auto escalation.
Paternalism, concerns over costs and economic burdens on participants limited the use of auto escalation — yet fewer than 10% of participants opted out at 67% of plans that used it.
Of the plans that were surveyed, 40% had more than $1 billion, 22% had $100 million to $1 billion, and 38% had less than $100 million. If larger plans are reluctant to combine auto enrollment and escalation, how does that bode for smaller plans? Leave a comment below about the willingness of your clients to use auto escalation.
