Majority of Large Employers Use Automatic Enrollment

June 30, 2010 (PLANSPONSOR.com) - A majority of large employers now automatically enroll workers into their 401(k) plans, according to a new survey by Towers Watson.

The survey of 334 companies with 1,000 or more employees found that 57% automatically enroll employees into their 401(k) plans. This includes 39% that automatically enroll new employees and 18% that automatically enroll all employees.   

Another 3% plan to begin automatic enrollment by next year, and an additional 18% are considering it.   

According to a press release, the survey also revealed that in 2009 relatively few employees declined to participate after they were automatically enrolled ¾ 85% of companies report fewer than 10% of employees opted out of the 401(k) plan.   

The survey also found that target-date funds are the most prevalent default investment option. Nearly three-fourths of respondents (72%) use target-date or lifecycle funds as the default option, followed by 13% who use balanced or lifestyle funds. Seventy-eight percent of those using target-date funds as their default option have selected funds not affiliated with their recordkeeper.  

Since the financial crisis hit in September 2008, 18% of the respondents have either reduced or suspended their matching contributions to their 401(k) plans. The press release said that among those employers, less than half (49%) have yet to restore the match, although virtually all indicated they are considering reinstating all or a portion within the next 12 months.   

Of the companies that have reinstated the match, the vast majority restored it to its previous level. A relatively small number of companies reinstated a smaller fixed match or reinstated a match that may fluctuate based on the company achieving certain goals.