A new study by Lincoln Financial Group (NYSE: LNC) and an employer retirement savings coalition finds that 94% of plan sponsors believe that automatic enrollment features help boost participation in employee-sponsored retirement/401(k) plans, as well as improve both deferral rates and investment performance.
However, the study notes that automatic enrollment features have not caught on as fast as their documented success would suggest.
Insurers like Philadelphia area-based Lincoln Financial have long advocated that automatic plan features offered through employer-sponsored retirement programs better prepare people for retirement financially.
The survey, co-sponsored by Retirement Made Simpler, the coalition formed by AARP, the Financial Industry Regulatory Authority (FINRA) and the Retirement Security Project (RSP), explores plan sponsors’ perspective on automatic retirement plan features including automatic enrollment, automatic escalation and qualified default investment alternatives (QDIAs).
The report also finds that 85% of plan sponsors report that automatic features are especially effective in helping participants who consider themselves less educated on retirement matters; and that plans with automatic escalation experienced deferral rates of 8% or higher. That’s compared to the average deferral rates of 4% or less for the majority of plans in America.
Almost all–97% –of plan sponsors who have adopted the bundle of automatic enrollment, automatic escalation and QDIA say the advantages outweigh any perceived disadvantages. Lincoln Financial says this reinforces the value of the full bundle rather than a single feature approach.