In the five years since the Pension Protection Act was passed, the use of automatic enrollment in retirement plans has increased from 16% of participants to over 50%, Fidelity found in an analysis of the firm’s retirement plans. Furthermore, the percentage of plans that default participants into age-based lifecycle funds leapt from 11% to 73%.
The average participation rate in plans without automatic enrollment, according to Fidelity, is 55%. Adding an auto-enrollment feature increases the average participation rate to 82%.
“The PPA is proving to be one of the most significant legislative initiatives helping American workers save for retirement,” James MacDonald, president of workplace investing for Fidelity Investments, said in a statement.
MacDonald noted that younger workers are most impacted by the PPA. “The auto features have significantly boosted participation among younger workers and have simplified the investing process, giving them a solid start to investing for the future.”