SURVEY SAYS: Executing a Re-Enrollment

Some say re-enrollment can improve participants’ portfolio construction, asset allocation and outcomes (see “Reenrollment CanAnswer Several Plan Problems”).

Last week, I asked NewsDash readers, has your plan been through a re-enrollment. If not, is your firm considering doing so? What is the best timing for a re-enrollment?

Eighty percent of responding readers said their plan has not executed a re-enrollment, while only 20% have. In addition, 40% indicated their firms have not or would not consider a re-enrollment, and 36% reported their firms have or would consider it. Twenty-four percent said they didn’t know if their firms have or would consider it.

Asked when would be the best time to execute a re-enrollment, nearly 42% of those responding said prior to the start of the plan year for the retirement plan, nearly 21% said any time during the plan year, and 12.5% selected “during open enrollment for health and other benefits.”

“Other” responses included:

• Right after I retire!;
• During a transition to a new recordkeeper;
• Prior to Jan 1;
• ABSOLUTELY NEVER!!!!; and
• Anytime other than during open enrollment for health and other benefits.

Those who made verbatim comments were split between for and against reenrollment. Some mentioned the time, effort and cost it would take. Editor’s Choice goes to the reader who said: “The investment industry told us we needed to get rid of DB plans so participants could take charge of investing their newly portable retirement benefits. Now, they are telling us we need to nudge the participants into higher fee investments that are managed by professionals because participants can't / shouldn't take charge.”

Verbatim

Does somebody not have enough to do? or additional proof of inertia at work....

We don't want anyone to "drop out" if we enroll anew.

We have two open enrollment periods a year for our retirement plan, six months apart. I offer enrollment / re-enrollment every time to everyone eligible but not participating. The ones who have decided to leave the company match money on the table seem stuck in that mode. Or worse, they say "Yes, Yes, I'm on it this time" until the last day I NEED the paperwork and then claim they just cannot. I even have trouble getting waivers out of them!

We hear that re-enrollment is a good idea, but we have a small staff and many participants!

The investment industry told us we needed to get rid of DB plans so participants could take charge of investing their newly portable retirement benefits. Now, they are telling us we need to nudge the participants into higher fee investments that are managed by professionals because participants can't / shouldn't take charge. If the employer is going to make the investment choices, the employer needs to bear the risk associated with the employer's exercise of control. Every time I turn around another retirement plan industry salesman is advising the industry to make the 401(k)s look and act more like DB pensions, but without the economic efficiencies and participant protections. 401(k)s that look and act like DB pensions are simply overpriced on both risk and fees.

The employer matching contribution is generous and the company has maintained a healthy participation rate. This year the company moved to a well-known administrator and while that generated significant publicity, it made little difference in the participation rate of 76-78%.

We're going to begin an auto-rebalance feature next year for all participants. If someone doesn't want it, they will have to opt-out.

During open enrollment might be easier on HR since it can handle everything at once, but it might not get employees' full attention to consider the value of the retirement plan and also to consider updating their investment options. Need to include emphasis on updating beneficiary designation at same time!

We have executed annual reenrollments for the majority of the years since our plan was opened

This process has worked remarkably well for us. Over 96% stay re enrolled!

We don't need to do a "reenrollment" because we're small enough that I know why all the non-participants aren't. And they know the importance of saving for retirement, and they will do so when they feel they can. But reenrollment has a cost, and sometimes a significant cost, for large employers. It would be nice if some of these so-called experts would acknowledge THAT reality sometimes, rather than just treating plan sponsors like they are just not doing the right thing by forcing individuals who have, in many cases, had multiple opportunities to participate. Let's face it, providers stand to gain from getting more people/dollars in the plan...