AARP: Auto Plan Features a Win-Win for Workers, Employers

An AARP news release said the Towers Perrin report suggested 401(k) employer contributions and enhancements typically offer a larger, positive return on investment (ROI) that can sometimes exceed what the employer might reap from spending in other areas such as pay and bonuses.

The likely reason, according to the report: employees’ increasing focus on retirement savings and security in an era when responsibility is shifting away from the employer to the individual.

“People are concerned about having enough money to retire, and they really value working for a company that is seeking to provide a cutting-edge retirement plan that works for real people,” noted Jon Dauphiné, AARP’s Director of Economic Security Strategy, in the news release “Auto 401(k)s are so important because they are designed to make the ‘right’ decisions for workers who may be too busy to learn about and monitor the plan on their own.”

The news release said Towers Perrin interviewed twelve employers on a range of issues related to maximizing 40l(k) value. Among eight of these organizations that have implemented automatic enrollment:

• virtually all have seen their 401(k) participation rates increase measurably;
• most have seen increases in their employees’ 401(k) contribution levels, and
• most report improvements in their ability to recruit and retain needed talent.

About half of the organizations interviewed said automatic plan features have also improved their ability to pass 401(k) nondiscrimination tests.

Some interviewees have seen decreased turnover, reductions in 40l (k) loan levels, and increases in average 40l (k) account balances. In fact, one employer noted that after introducing enhancements to its 40l (k) plan, including automatic enrollment, the voluntary turnover went from 18% to 2%.

More information about AARP’s support for auto plan features is here .