PSCA Study Shows Steady Increase in Automatic Features

Plans with an automatic enrollment feature nearly doubled over the past decade according to the Plan Sponsor Council of America’s (PSCA) 60th Annual Survey of Profit Sharing and 401(k) Plans. PSCA, part of the American Retirement Association, found 59.7 percent of plans have an automatic enrollment feature in 2016 compared to 35.6 percent in 2007. 

The Survey found that automatic enrollment is most common in large plans – 70 percent of plans with 5,000 or more participants have automatic enrollment versus 34 percent of plans with less than 50 participants. More than half of plans with automatic enrollment are set up for new hires only. The most common reason companies do not use automatic enrollment is because they’re satisfied with participation rates. 

Three-fourths of automatic enrollment plans automatically increase default deferral rates over time. One-third of these plans automatically increase default deferral rates overtime for all participants, one-third offer voluntary escalation, and 12 percent escalate it for all under-contributing participants only. 

“Plan sponsors are combating participant inertia by adopting features such as automatic enrollment and auto-escalation to help their employees maximize their retirement plan benefits and reach their retirement goals,” said PSCA Executive Director Jack Towarnicky.  

PSCA’s 60th Annual Survey reflects the 2016 plan-year experience of 590 DC plan sponsors. The full survey is available to order as a hard-copy bound book or a PDF. It contains 182 tables of data covering topics such as Roth IRAs, employee eligibility, and investment advice.