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  • How America Saves—Automatic Features Gain Traction, Show Some Flaws
    Vanguard’s most recent How America Saves 2015, which analyzes 2014 defined contribution plan data, shows strong acceptance of automatic plan features. The report notes that plan participation, contribution rates and portfolio diversification increasingly occur through plan sponsor design rather than direct participant decision making.

    The report also acknowledges that, while automatic enrollment increases participation rates, “it also leads to lower contribution rates when default deferrals are set at low levels, such as 3 percent or lower.”

    Among automatic enrollment plans:
    • 49 percent enroll participants at a 3 percent rate, and 15 percent chose a 4 percent default in 2014.
    • 70 percent increase contribution rates annually. Forty percent of plan sponsors cap contribution escalation at 10 percent, but a quarter set caps between 12-50 percent.
    • Another positive trend is the half of plans automatically enroll all eligible non-participants, not simply new hires.
    • Among plans that automatically enroll employees, 7 in 10 use all three features of automatic plan design: auto-enrollment, auto-escalation and automatic allocation through balanced funds.
    Read the Study
  • Study: Automatic Enrollment Good—Can Be Better
    • A new working paper from the Center for Retirement Research at Boston College finds that automatic enrollment is associated with a higher proportion of workers included in defined contribution (DC) plans—but also concludes that automatically enrolled workers are less likely to contribute to their DC plans than voluntarily enrolled workers.
    • How do you improve the situation? The authors suggest that plan sponsors could offer a more generous employer match and use auto escalation.
    Read the Working Paper
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