SAN FRANCISCO — Automatic enrollment and appropriate default options dominated the conversations at Pensions & Investments' recent conference.
These topics and other reactions to the provisions of the Pension Protection Act were at the top of the charts for P&I's ninth annual Defined Contribution/401(k) West Coast Conference Oct. 8-10 in San Francisco.
James M. Delaplane Jr., a partner at the law firm of Davis & Harmon LLP, Washington, opened the conference with a review of Washington's new pension law.
"The advice provisions have been oversold. There was a lot of noise and activity around advice, but most (plan sponsors) will be sticking to the advice provisions they had prior to the PPA," said Mr. Delaplane.
The most important provisions of the PPA were not the advice provisions, but the clarifications regarding automatic enrollment and the permanent adoption of DC deferral provisions. The provisions, first spelled out in the Economic Growth and Tax Relief Reconciliation Act of 2001, included increased limits on deferrals, the removal of deferrals from calculations of maximum deductible amounts and the addition of a Roth 401(k) feature for deferrals.
In a breakout session on automatic enrollment, Carol Waddell, director of product development at T. Rowe Price Retirement Plan Services Inc., Baltimore, said many plan sponsors will revisit automatic enrollment now that the PPA has been signed.
"Some plan sponsors that enacted auto enrollment at (a 3% default allocation) will now bump it up to 6%," she said, adding that those types of changes will become more common.
Cindy Conway, group director of compensation and benefits for Cadence Design Systems Inc., San Jose, Calif., and a member on one of the panels, said the company's $450 million plan will add automatic enrollment in January.
There was also discussion about appropriate default options for automatically enrolled employees.
Jonathan Rose, benefits supervisor for Silgan Container Corp., Woodland Hills, Calif., said: "We will be moving over to age-based (lifecycle) funds soon. … We currently use a capital preservation fund, which is a ‘no harm, no foul' fund. We want to do something more now." The $50 million 401(k) plan has offered auto enrollment since 2001.
Stuart O'Dell, director of retirement investments for Intel Corp., Santa Clara, Calif., said plan officials are big fans of lifecycle fund strategies, which the $3.5 billion plan rolled out in 2004.
"We're now looking at alternatives for our (custom-made) lifecycle funds. I can see us adding an alternatives sleeve," said Mr. O'Dell.