Large employers adopting automatic enrollment for their 401(k) plans often seem to increase their matching contribution, a new study by the Employee Benefits Research Institute finds.
Automatic enrollment was among the changes to 401(k) retirement plans made by plan sponsors as a result of the Pension Protection Act of 2006. The finding that employers have been kicking in more money to these plans could mean that more employees will stay in these plans longer than experts previously had expected, EBRI notes in a report on its study. Under the law, employees may drop out of their employer's plan voluntary, even if automatically enrolled when they first became eligible to join the plan.
The EBRI research used plan information on employer match rates both before and after adoption of auto enrollment, using data from Hewitt Associates, Lincolnshire, Ill.
Its study analyzed 225 large defined contribution plans that had adopted automatic enrollment for 401(k) plans by 2009 but did not have them in 2005, before the PPA was adopted.
According to the study, the average total employer contribution rate for 2009 was 6.4% of compensation, compared to 5.5% in 2005.
