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
- 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