In a white paper published Tuesday, the Defined Contribution Institutional Investment Association said its research with both plan sponsors and its membership had identified several common barriers inhibiting a meaningful dialogue about the robust adoption of auto features in DC retirement plans.
The DCIIA proposed a standardized lexicon to promote further adoption of automatic features, noting that competing definitions of auto features is one barrier to their adoption. Take the term “re-enrollment.” Under one paradigm, this relates to auto enrollment: the act of sweeping current non-participating employees into a plan. Under another paradigm, it refers to “restarting” the plan by defaulting all plan assets into a qualified default investment alternative.
Even the latter definition does not mean the same thing to everyone, according to the paper. For some, it is inextricably linked to the safe harbor defined in the Pension Protection Act of 2006, which enables participants to opt out of the re-enrollment and allocate their plan assets as they see fit. To others, the safe harbor is incidental to the act of re-enrollment.
“During the course of DCIIA’s 2014 Plan Sponsor Survey on Auto Features, the project team noticed that multiple terms are used to describe similar features, resulting in some confusion,” Joshua Dietch, head of retirement and institutional at Strategic Insight and co-chair of DCIIA’s retirement research board, said in a statement. “This prompted further DCIIA research to identify how the industry uses common terms including automatic enrollment, sweeps and re-enrollment.”
Following is the DCIIA’s proposed definitional framework, which it said is not intended to be all-encompassing. Rather, it aims to promote discussion of auto features in order to increase plan sponsor adoption of intelligent plan design features that improve participant retirement outcomes.
Auto Enrollment — Automatically enrolling new hires into a qualified default investment alternative within the DC plan, at a fixed contribution rate.