Retirement Made Simpler News
September 16, 2010
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Research and News
Adopting Automatic Enrollment in the Public Sector: A Case Study of South Dakota’s Supplemental Retirement Plan
A new Retirement Made Simpler study of South Dakota’s Supplemental Retirement Plan has found that instituting automatic enrollment programs results in a staggering leap in participation rates. The report examines the background and passage of automatic enrollment legislation in South Dakota and its initial impact on participation rates:
- Prior to the policy change, about 20 percent of all eligible employees participated in the SRP. Eight months after the passage of automatic enrollment legislation, 91 percent of new, eligible employees whose units chose to implement automatic enrollment participated in the plan and remained in it.
- In striking contrast, only 1 percent of employees in government units that had not implemented automatic enrollment voluntarily enrolled in the SRP.
- Opt-out rates suggest employee satisfaction with the policy. Of the 1,172 new hires that were enrolled, 102 opted out, an 8.7 percent opt-out rate.
“South Dakota is an example for other states,” notes Joshua Franzel, study co–author and vice president of research for the Center for State and Local Excellence. “The study offers lessons learned from the new SRP automatic enrollment implementation that will inform the efforts of other governments considering similar policies. Automatic enrollment is a useful feature that can be used by public employers to continue to provide retirement security to public servants across the country.”
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Majority of Employers Offering Automatic Features to Increase and Simplify Saving for Retirement
A new survey published by the International Foundation of Employee Benefit Plans (IFEBP) looks at employer retirement plan offerings in the midst of a skittish economy. The survey examines four types of U.S. organizations—corporations, professional service firms, public employers and multiemployer plans—and finds that not only are employers maintaining retirement benefits, but they are also implementing features like automatic enrollment and retirement counseling to assist employees in building a secure retirement.
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- The survey found that nearly three in four employers (72 percent) use automatic features in their plan. Of these employers, the most popular automatic feature offered is target-retirement-date investment funds (71 percent).
- Just over half (51 percent) have a provision that allows the employer to automatically contribute a percentage of the worker’s pay to a plan unless the employee opts out.
More Employers Make 401(k) Enrollment Automatic
You could be contributing to a retirement plan without even knowing it. That's because an increasing number of companies are offering "opt-out" 401(k) plans that encourage more workers to save.
The percentage of employers that offer automatic 401(k) enrollment has increased dramatically to 38 percent, according to financial services company Charles Schwab. That's more than seven times the rate in 2005, when automatic enrollment was at 5 percent.
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