Public Plans Slower to Adopt Automatic Enrollment

A brief from the Center for State and Local Government Excellence, “Using Automatic Enrollment in Local Government Retirement Plans to Increase Savings,” contends while many local governments have supplemental savings plans, there are few incentives for employees to enroll in them.

In addition, Paula Sanford, a researcher with the University of Georgia and the brief’s author, finds the main reasons local governments have been slow to adopt automatic enrollment include:

• Legal constraints. Only 11 states permit automatic enrollment for public defined contribution (DC) plans. In a few places, an exemption to anti-garnishment laws has been written into statute for a particular retirement system or plan.
• Perception. Government leaders worry that automatic enrollment in a supplemental savings plan might overburden their employees, especially those who earn modest wages.
• Labor questions. There is debate in the labor community about whether or not automatic enrollment should be supported.
• Administrative challenges. Some government DC plans utilize multiple recordkeepers.

The brief examines the experience of local governments that have successfully adopted automatic enrollment such as: Cobb County, Georgia; Multnomah County, Oregon; and the city of Los Angeles. Research also looked at the South Dakota Supplemental Retirement Plan, which serves more than 470 units of local governments. Sanford notes that working with employees and focusing on education were key to successful implementation of automatic enrollment plan features.

A previous brief by the center suggests one way supplemental retirement savings plans for public employees could be enhanced is by using automatic deferral escalation.

A copy of the brief about automatic enrollment can be found here.