401(k) retirement plans with automatic enrollment over time maintain higher participation rates compared with plans without it, according to a survey released today by New York Life Retirement Plan Services.
According to the study, plans with auto enrollment achieved 93 percent participation in the first year and 87 percent after four years. In contrast, plans without auto enrollment generated a participation rate of 37 percent in year one and 56 percent in year four.
“Many plan sponsors and their advisors have been looking for solid proof that auto enrollment works, and here it is,” David Castellani, CEO of New York Life Retirement Plan Services, said in a statement. “Plain and simple -- auto enrollment encourages participant deferral rates. There isn’t a logical argument not to employ auto enrollment.”
New York Life’s study is based on 480 plans and 800,000 participants across New York Life’s retirement platform. Auto enrollment in 401(k) plans was encouraged in the Pension Protection Act of 2006. The number of plans on the New York Life platform that have adopted auto enrollment climbed to 64 percent as of Sept. 30 compared with 21 percent in 2006.
A division of New York Life Investment Management LLC, New York Life Retirement Plan Services administers more than $43 billion in bundled retirement plans to corporations and unions throughout the U.S.