Automatic Enrollment Study

It is true that automatic features increase participation, deferral rates, and account balances, but this study shows that a one-size-fits-all solution is not the complete solution for providing adequate retirement benefits. It concludes that participants enrolling in a plan using the PPA safe harbor plan design, two-thirds of them age 21 to 60, those who start saving in their late thirties, will retire under-funded and participants younger than 31 will be contributing more than they need at the expense of enjoying a growing family.

Full Automatic Enrollment Sudy
Automatic Enrollment Study (continued)

Industry pundits are actually advocating increasing the initial contribution and annual increases above the PPA safe harbor plan design to top out at 15% to 20% of salary. Our work mathematically demonstrates that younger employees already exceed the necessary savings at the current default levels and older ones probably need even greater contribution than those pundits suggest. To further exacerbate this situation, this development continues to fail to address the investment problem – not putting participants in an investment that could earn the appropriate return. For those who are older and very under-funded, increased expected returns are required just when target date funds for their age are becoming more conservative.

To increase the likelihood that all participants have adequate benefits, our personalized investment guidance is required to provide the correct benefit to each participant.
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bcorrin@retirementanalyst.com