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Majority of employers have not adopted automatic features in their 401(k) plans, AARP research shows

Employers with at least 500 employees remain hesitant to adopt automatic enrollment features in their retirement savings plans and automatically enroll their employees, according to an AARP survey released on June 2. An overwhelming majority of employers—nearly 60 percent—report that they have not adopted automatic enrollment in their 401(k) plans although most are aware of this feature and its potential benefits including helping employees save more for retirement.

“Too many employers are not taking advantage of a simple, effective and popular tool to help their workers save for retirement,” said Michael Herndon, manager of Financial Security at AARP. “Despite concerns to the contrary, research shows that employees overwhelmingly appreciate participating in an auto enrolled retirement savings plans, which could provide a competitive edge to employers who want to recruit and retain the best possible workforce.”

Employers surveyed cited a number of reasons for not adopting  automatic enrollment in their 401(k) plans, including:

  • a concern that employees would not like automatic enrollment (20 percent);
  • concern about costs (20 percent);
  • contentment with the status quo (14 percent); and
  • a lack of information (10 percent).

Only 16 percent of employers who currently do not have automatic enrollment features reported that they would be likely to add it in the next year.

“Employers have a tremendous opportunity to help employees start saving for retirement and there are many resources available to help simplify this process,” said Herndon.

One such resource is the AARP’s “Retirement Made Simpler” program. Created by the AARP along with FINRA and Retirement Security Project in 2007, the program is designed to address many of the concerns employers expressed. The program aims to provide employers all the tools necessary to help their employees save more efficiently, including information on the basics of automation, legal and liability issues and best practices when deciding to automate 401(k) plans.

Source: AARP; www.aarp.org.