Getting Congress to approve "safe harbor" provisions shielding corporate 401(k) sponsors from liability for needed revisions is crucial to making those plans effective mainstays of retirement income, said Bob Reynolds, vice chairman and COO of Fidelity Investments. Those revisions should include automatic enrollment for employees and lifecycle funds as a default option, Mr. Reynolds said today at a breakfast speech before the Boston Chamber of Commerce.
The House of Representatives has already approved such provisions, and the matter is now before the Senate. For its own 401(k) plan, Fidelity will institute auto enrollment and other steps from the start of 2006 to make sure its employees get the most out if their savings program, he said.
Mr. Reynolds also noted that research shows steps such as automatic enrollment, auto-escalation - whereby an employee's 401(k) contributions are automatically increased when he or she gets a raise - and use of lifecycle funds can boost the percentage of post-retirement income that workers in the lowest-wage quartile can receive from their 401(k) plans to 52% from 23% at currently.