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Plan Automation

Finally, while the world of retirement is complex, as you have seen, technology is making it easier. There has been a tremendous shift toward automated plan features in recent years. Automatic plan features leave participants with ultimate control, but realign traditional “defaults.” This includes:

  • Auto-Enrollment: Participant is enrolled in retirement savings plan unless participant “opts out.”
  • Auto-Escalation: Incremental savings increases unless participant elects otherwise.
  • Auto-Rebalancing: rebalancing of investments unless participant elects otherwise

The adopting employer can typically elect whether to implement various automatic plan features.

Automation can lead to:

  • Greater levels of participation
  • Higher deferral rates
  • Better investment decisions

However, it’s important to remember automated features are only as good as the plan design features

For example:

  • Too low of a default deferral rate can result in employees contributing less than they would have voluntarily contributed
  • Too high of a default deferral rate can result in employees simply opting out of participation