We have a retirement crisis in this country thanks to a Social Security program that has too many retirees to pay to, and the death of the pension plan in the private sector. The fact is that while 401(k) plans are an effective savings vehicle for retirement, they’re only effective when employees actively participate by deferring their income. For many reasons, employees don’t participate and this is problematic for the plan sponsor because it may impact compliance testing in a negative way and if their 401(k) plans don’t achieve critical mass, then they won’t get the better pricing reserved for larger plans. So automatic enrollment for a 401(k) plan that automatically enrolls employees who don’t affirmatively opt-out of deferring is an effective tool to get employees to save as well as improving the compliance aspects of a 401(k) plan. As a plan provider, you need to take advantage of opportunities and I believe automatic enrollment is something you should advocate for.
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