Substantial majorities of defined contribution participants endorse or accept various auto features even if some plan sponsors appear hesitant to offer them, said a survey issued Monday by J.P. Morgan Asset Management.
In a national survey of 401(k) plan participants, J.P. Morgan found that 75% favored or were neutral about auto enrollment, 74% supported or were neutral about auto escalation and 82% favored or were neutral about auto re-enrollment, said a report on the survey. Equally important in understanding participants’ willingness to accept auto enrollment and auto escalation was the low opt-out rate, said Catherine Peterson, managing director and global head of insights programs at JPMAM, in an interview. The opt-out rate was 1% for auto enrollment and 2% for auto escalation, she said.
Ninety-six percent of respondents said they were satisfied with automatic enrollment, while 97% said they were satisfied with auto escalation, she added.
For participants who were involved in a re-enrollment, 73% allowed their investments to be shifted to a target-date fund, and 99% of this group said they were satisfied, the report said.
Despite participants’ attitudes about auto features, “there is a potential misperception among plan sponsors,” the report said.
“A key reason given by many plan sponsors for not implementing automatic features and conducting a re-enrollment is anticipation of employee pushback,” said the report. “Survey results, however, suggest that participants recognize their need for saving and investing guidance, and most are in favor of, or at least neutral toward, these features and strategies.”
Ms. Peterson said sponsors may fear they are taking on too much risk or that employees will object. However, the low opt-out rates and the few complaints by participants demonstrate that the fears are unfounded, she added.
The J.P. Morgan survey also found that higher percentages of participants under 30 were supportive or neutral for several auto features vs. participants 30 and older — 84% vs. 72% for auto enrollment, respectively; 86% vs. 70% for auto escalation; and 93% vs. 79% for re-enrollment.
The online survey, conducted in January, covered 1,001 DC plan participants who worked full-time for a company with at least 50 employees and who had contributed to a 401(k) plan within 12 months before the survey.