The percentage of defined contribution plans offering auto enrollment climbed to 32% last year — up three percentage points from 2011 — according to the latest annual analysis by Vanguard Group of plans for which it is record keeper.
Although the 2012 auto-enrollment percentage is a record, “I think we may be reaching a plateau,” Jean Young, co-author of the annual report, titled “How America Saves,” said in an interview. “Most of the plans have evaluated auto enrollment and have made their call.”
Vanguard's research showed that auto enrollment is most popular among larger plans, with 56% of plans with more than 5,000 participants offering this feature compared with 23% of plans with fewer than 1,000 participants, said Ms. Young, senior research analyst for the Vanguard Center for Retirement Research. Among plans with 1,000 to 4,999 participants, 54% offered auto enrollment.
Ms. Young said 80% of all plans offering auto enrollment allow it to cover only new employees. She said plan executives are concerned about auto-enrolling all employees because of the cost and the belief that existing employees will feel pushed into doing something.
Among other findings, a report on Vanguard's annual analysis said:
- The average balance among participants in plans reached a record $86,212 at year-end 2012 vs. the previous record of $79,077 in 2010. The median balance of $27,843 at year-end 2012 also was a record; the previous median record of $26,926 was in 2010. The gap between average and median balances “is due to a small number of very large accounts that significantly raises the average above the median ,” according to the report.
- The percentage of extreme allocations by participants — either 100% equities or 100% fixed-income in individual accounts — continued to drop, falling to 16% last year from 18% in 2011 and 27% in 2008. Ms. Young attributed the changes to increased use of what Vanguard calls professionally managed allocations — target-date funds, balanced funds and managed accounts.
- Last year, 36% of all participants in Vanguard-administered plans used these professionally managed allocations vs. 33% in 2011 and 22% in 2008. Vanguard predicts the percentage will grow to 55% by 2017.
Vanguard's annual report is based on records of approximately 2,000 plans — most of which are 401(k) plans — serving approximately 3.4 million participants.