The use of features like auto enrollment and auto escalation have increased significantly in recent years, but future adoption might slow, according to a plan sponsor survey conducted by the Defined Contribution Institutional Investment Association's Retirement Research Center.
The survey, released April 23, represents the views of 175 defined contribution plan sponsors and is based on year-end 2018 data.
Auto enrollment saw growth in adoption — to 69% in 2019, up from 60% in 2016, including 73% of plans with at least $200 million in assets.
When looking ahead, only 7% of plans currently not offering auto enrollment said they are "very likely" to do so in the next 12 months. Another 14% report that they're "somewhat likely" to add this feature, the survey found. When asked why they wouldn't offer the feature, respondents frequently cited possible increases in record-keeping expenses; appearing too paternalistic; it being deemed unnecessary, as participation is already high; costs being too great (due to the match required); and concern over possible employee complaints, DCIIA said.
For auto escalation, 69% of plans offer the feature, up from 50% from the prior survey published in 2017.
Of note, 7% of plans that don't offer auto escalation said they were "very likely" to offer it in the next 12 months, while 5% were "somewhat likely." For respondents that don't offer the feature, they said it was because of concerns that it's too paternalistic and/or have not studied it carefully enough, the survey showed.
Two-thirds of plans offering auto features said they see a direct and attributable benefit to their plans' outcomes as a result, the survey found. The most commonly cited benefit is having higher participation, followed by faster growth of assets in the plan.
"In their survey responses, plan sponsors indicate that increasing savings rates and improving communications top their list of objectives for their plans," DCIIA said in its survey summary. "Implementing auto features is directly helping plan sponsors get the results they desire. In short, plan sponsors are adopting auto-feature practices because they recognize that they are working."
The survey also found that 24% of sponsors have done a qualified default investment alternative re-enrollment, up from 18% in the prior survey.
