Compliance June 16, 2005

UK Group Climbs aboard Auto Enrollment Bandwagon

June 16, 2005 (PLANSPONSOR.com) - At a time when automatic retirement plan features have become a hot discussion topic on Capital Hill and in the US retirement services industry, a UK trade group has proposed automatic pension enrollment in that country.
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A Web statement  from the Association of British Insurers (ABI) with a statement from Stephen Haddrill, director general of the ABI, said employees would be put into their employers’ pension plans unless they opt out.

“ There is no single ‘magic bullet’ solution to  Britain’s pension problem,” Haddrill said in the   statement. “We need a package of reforms to encourage a new savings culture throughout every part of our society. Our proposals are both affordable and effective and we recommend them to the Pensions Commission and the government. We believe that a package approach is also the best basis for achieving the political consensus that the government seeks.”

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>Also as part of its proposed  UK pension reforms, ABI suggested:

  • that employers without their own pension plans be required to make pension payments into any pension program the employee designates
  • creating a Pension Contribution Tax Credit to refund to employers their National Insurance payments, provided they make a set level of contribution to employees’ pensions and that at least two-thirds of their workforce are members of the company pension
  • introducing a Workplace Advice Credit, particularly targeted at small businesses, which would allow such companies to claim back 50% of the cost of providing a set amount of financial advice to each employee.

>The ABI pension reform package report is here .

In the US, the latest Congressional effort to encourage automatic plan features  (See Senate Pension Bill Eases Auto Enrollment, Auto Increase Provisions) came in a proposal by US Senators Gordon Smith, (R-Oregon), and Kent Conrad, (D-North Dakota). Under the proposal, employers who adopt auto enrollment, auto increase, an accelerated vesting schedule and a certain level of contributions will receive relief from complex nondiscrimination testing and top-heavy rules.

>Also, this week Hewitt Associates released the results of a poll of 450 large firms that found that just under o ne in five (19%) automatically enrolled employees in their 401(k) plans, compared with 14% in 2003 and more than a quarter (26%) provided automatic rebalancing, up from 11% two years ago (See Hewitt: Auto Plan Features on the Rise in 2005 ).

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