Auto Enrollment Biggest 401(k) Change after PPA

October 3, 2006 ( - Nearly four in 10 (38%) of the chief financial officers (CFO) in a recent survey said their firms expected to add 401(k) automatic enrollment programs as a result of the recently enacted Pension Protection Act (PPA).

A news release reported that about 22% of the CFOs said they will be offering investment advice while a like number said they will add Roth IRA options. The “CFO Outlook Survey” is conducted quarterly by Financial Executives International (FEI) andBaruch College’s Zicklin School of Business. 

Eighty-nine percent of responding firms in the latest poll offer 401(k) plans. As a result of the PPA, 28% have made or plan to make changes based on the law’s provisions, while another 33% have not made a decision yet and 39% anticipate no change in the near term, the press release said.

According to the announcement, a third of the CFOs reported that t he most common 401(k) default investment options for auto enrollment will most likely be money market funds (33%). Rebalancing asset allocation funds are a close second at 29%, the news release said. The Guaranteed Investment Contract (GIC) will be the most likely default option at only 4% of the companies.

Automatic enrollment has been a major issue in the retirement planning community in recent months – particularly after the passage of the PPA and the recent release by the Department of Labor (DoL) of proposed rules governing default investment options.

Meanwhile, CFOs as a whole continue to be a generally optimistic bunch, according to the survey. CFOs’ economic optimism dropped only slightly in the third quarter to 67.6, compared to 68.6 in the second quarter.

The survey found that 73% of the CFOs predicted their firms’ capital spending will go up in the coming year, at a weighted average rate of nearly 8%. This is very close to last quarter’s forecast. 

Technology spending forecasts were virtually unchanged at nearly 7%. Anticipated health care spending declined from 8.4% to 7.7%, and hiring fell from 4% last quarter to 3% for the third quarter, according to the announcement.  

Some 29% of respondents cited competition as their first or second most pressing worry. Consistent with their competition concerns, 36% of those surveyed expect their companies to spend more on product investment in the next year, while 43% anticipate ploughing more back into the company. 

Full survey results will be available on Thursday at This quarter, the survey interviewed 171 corporate CFOs electronically during the week of September 18.