PSCA: Auto-Enrollment Boosts Participation

April 19, 2001 ( - Automatically enrolling employees in 401(k) plans appears to increase both long- and short-term participation patterns, according to a new study from the Profit-Sharing/401(k) Council of America.

The Automatic Enrollment 2001 study, which examined the automatic enrollment practices and experience of 25 employers, found that the average participation rates of those plans rose from an average of 75.7% to 81.3% a year later.

Among companies that provided both a current plan participation rate and a rate three months prior to implementing automatic enrollment, participation rose from 68.1% to 77.1%.

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Automatic enrollment involves enrolling eligible workers in their employer’s 401(k) plan without requiring them to file an enrollment request.

Generally a specified default contribution rate is established, as well as a designated investment fund.  Participants have the option to change these assumptions later on, and can cease participation by actively requesting to be excluded from the plan.

Default Options

The most common automatic deferral rate was 3% of pay, used by some 60% of plans.  Not surprisingly the most common automatic deferral rate in the study was a stable value option, used by nearly half (46%) of responding programs. 

Money market and balanced stock/bond funds tied for second choice, with each registered by 21% of the respondents, while lifestyle funds were indicated by 12.5%.

Employer matching contributions varied, with $ .50 on the dollar cited most often (32%), followed by a dollar for dollar match noted by 28% of the respondents. The vast majority (61.9%) matched every payroll period, but 28.6% matched only once a year.

Plan sponsors were responsible for employee notification of the automatic enrollment policy in three quarters of the companies, while the record keeper was in 16.7%. The responsibility was shared in the remaining situations.

Nearly all (91.7%) provided the notification in an enrollment kit, but employers used a variety of methods to communicate the program.  Other means were:

  • 33.3% – one-on-one meetings
  • 25.0% – separate mailings
  • 20.8% – group meetings

Almost two thirds of employers offered enrollment in the first 30 days of employment, while 20% waited a year or more. Only 12% waited between three months and a year.

The most common opt out method was via voice response system, cited by nearly 70% of the respondents.  Other methods included:

  • Customer service representative – 47.8%
  • Paper forms – 39.1%
  • Internet/intranet – 34.8%

See MORE on auto-enrollment

The survey is available at