Americans struggle to regain their shrunken wealth

Washington Post

Though the S&P 500 remains 28 percent below its October 2007 peak, employees who have stayed invested in 401(k) plans and continued to contribute have fared better. About 78 percent of them now have more money in those accounts than before the market top three years ago, according to estimates by Jack VanDerhei of the Employee Benefit Research Institute.

On Match To 401(k) Waiting on Return of 401(K) Match Wall Street Journal

On Match To 401(k) Waiting on Return of 401(K) Match
Wall Street Journal

The Impact of Automatic Enrollment in 401(k) Plans on Future Retirement Accumulations: A Simulation Study Based on Plan Design Modifications of Large Plan Sponsors

full study

Executive Summary

SIGNIFICANCE OF AUTO-ENROLLMENT: Automatic enrollment of participants in 401(k) plans, which was encouraged by provisions in the Pension Protect Act of 2006, is designed to overcome the drawbacks of voluntary enrollment by getting more workers to save in their work place retirement plan. Auto-enrollment for 401(k) plans has been demonstrated by previous EBRI research to have substantial potential benefits for some employees.

NEW EBRI RESEARCH: This EBRI study analyzes plan-specific data of 1,000 large defined contribution plans for salaried employees from Benefit SpecSelect™ (Hewitt Associates LLC) in 2005 and 2009 to compare a subsample of plan sponsors that did not have auto-enrollment in 2005 but that had adopted it in 2009. Actual plan information on both actual auto-enrollment and actual match rate information were coded both before and after adoption of auto-enrollment from 225 large 401(k) plan sponsors and found that the average change was positive under auto-enrollment in each of the following three categories:

• The first-tier match rate.

• The effective match rate.

• The average total employer contribution rate.

MODELING ANALYSIS: This analysis created a series of simulation programs using these data. The analysis indicates that the adoption of automatic enrollment in 401(k) plans is likely to have a very significant positive impact (even greater than EBRI projected in 2008) in generating additional retirement savings for many workers, especially for young and low-income workers:

• Under baseline assumptions, the median 401(k) accumulations for the lowest-income quartile of workers currently age 25–29 (assuming all 401(k) plans were voluntary enrollment plans as typified by the 225 large plan sponsors described above) would only be 0.08 times final earnings at age 65.

• However, if all 401(k) plans are assumed to be using the large plan sponsor auto-enrollment provisions, the median 401(k) accumulations for the lowest-income quartile jumps to 4.96 times final earnings (if 401(k) participants revert back to the default contribution when they change jobs) and 5.33 times final earnings (if they retain their previous contribution level when they change jobs).

• There are also large increases even for high-income workers: The multiple under a voluntary enrollment scenario is 2.41 times final earnings compared with 9.15 or 9.81 under auto-enrollment, depending on the assumptions for employee reversion to default contribution rates upon job change.

Future EBRI research will examine the extent to which the increased 401(k) generosity resulted from modifications to defined benefit plans as pension plans were close or frozen.

How Automatic Enrollment Affects Your 401(k) Match

US News and World Report

Big firms with auto enrollment hike 401(k) match

Pensions & Investments

Update: 401(k) Auto Enrollment Not Shrinking Matches

CBS Moneywatch

Data Show That Automatic Enrollment in 401(k) Plans Has Led to Higher Match Rates from Large Plan Sponsors

FOX Business

401(k) Auto-Enroll Has Unintended Impact

401(k) Auto-Enroll Has Unintended Impact
Financial Advisor Magazine