Among 401(k) plans with automatic enrollment, those with a default saving rate higher than 3% have an 84% participation rate, while those defaulting at 3% or lower have a participation rate of 72%, according to a white paper by MassMutual Retirement Services. Plans with higher default rates are more likely to have a company match, accounting for the increased participation rate, according to the paper, Automation: Three Steps to a High Performance Plan.
The paper also offers criteria that 401(k) plan advisers and sponsors should consider when evaluating automatic plan features such as automatic enrollment, automatic deferral increase and automatic asset allocation. Suggested criteria include considering whether the plan will offer a company match and what kind of education will accompany the new features. MassMutual used data from 400 plan clients.
To see the entire paper, please go to www.pionline.com/whitepapers.