Automatic enrollment increases 401(k) plan participation rates, but it can have a negative effect on asset accumulation for some employees, according to a joint study released today by Hewitt Associates, Harvard University and the University of Chicago. Automatically enrolled participants tend to remain at the company’s default elections, often 2% to 3%, and stay in conservative investments such as money market or stable-value funds, even after years in the plan, the study revealed.
The study examined the participation and default behavior over a 2- to 3-year period of 100,000 eligible employees hired by three U.S. companies before and after automatic enrollment was initiated.
