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Defined Contribution

Small share of government DC plans using auto enrollment — NAGDCA survey

The use of automatic enrollment by deferred compensation plans and other government DC plans has been discouraging, according to Keith Overly, vice president of the National Association of Government Defined Contribution Administrators.

Mr. Overly noted that a new NAGDCA survey found that only 20% of plans offered auto enrollment.

"There are some legal prohibitions at the state level," said Mr. Overly in an interview outside the annual NAGDCA meeting in Milwaukee. Among the survey respondents who didn't offer auto enrollment, 36% cited legal prohibitions as a reason, according to a survey report. Some states don't allow money to be taken from a paycheck without permission by individuals.

Another 28% of this group said they feared negative reaction from employees, while 10% cited lack of management interest and another 10% cited "union issues," said the report on the survey. Respondents could choose more than one answer. Thirty-eight percent cited "other" as a reason for not providing auto enrollment.

"We offer the opportunity to employers" to provide auto enrollment, said Mr. Overly, executive director of the $13 billion Ohio Public Employees Deferred Compensation Program, Columbus, and chairman of the NAGDCA annual conference. "There's no negative reaction (by employees). It's a perception that's not valid."

A similar survey published last year reported that 26% of plans offered auto enrollment.

By contrast, the NAGDCA survey reported that the percentage of plans offering automatic escalation rose to 31% from 22%.

NAGDCA encourages plans to consider auto features, and the plans can provide auto escalation without offering auto enrollment, Mr. Overly said.

The latest NAGDCA survey covered 52 plans with $120 billion in assets, serving 2.5 million participants. The survey was based on email responses in April and May.

Among the respondents, 68% were 457(b) plans, 18% were 401(k) plans, 10% were 401(a) plans and 4% were 403(b) plans.

The survey results "should be used as a tool for informed decision-making rather than as absolute standards," the report said. "Any two plans can be successful yet have very different experiences with regard to certain performance measures."