A Fidelity news release said that employer adoption of automatic increase programs rose 26% and the use of Fidelity Freedom Funds as a plan default increased 130% during the 2005 to 2006 period.
Adoption rates are likely to continue to rise in the year ahead, according to a recent Fidelity poll of 400 plan sponsors who do not currently offer auto programs. The poll revealed that 44% are considering adding auto enrollment, 27% are considering adding an automatic deferral increase feature, and 31% are considering adding lifecycle funds as a default in their 2007 workplace savings plan design, according to the news release.
“Employers are seeing that automatic plans have the ability to get more employees onto a path of greater retirement readiness, which is why plan adoption rates are growing. This is a healthy trend in the defined contribution industry – and one we strongly support,” said Jeffrey Carney, president, Retirement Services, Fidelity Employer Services Company, in the news release.
Fidelity also is testing Auto Catch-Up, a new plan feature that aims to help workers aged 50 and above – who are eligible to contribute an additional $5,000 annually to their workplace savings plan – to have this amount automatically deducted and put into their plans (See Fidelity Testing “Auto Catch-Up” Provision ).
According to Fidelity recordkept data, less than one in 10 of those eligible employees make catch-up contributions.