Most workers want to save for retirement, but many never get around to doing it. Automatic 401(k) plans address this inertia by turning the tables around. Rather than asking workers to sign up, employees are automatically enrolled unless they decide to opt out. Research shows that this strategy works—raising participation rates to 85 percent or more—and it’s one of the simplest things employers can do to help employees save for retirement.

Recently, AARP studied employer attitudes about automatic 401(k) plans—part of an effort to ultimately help AARP members and other Americans save money and position themselves for financial stability in retirement. The findings shed light on employer views about enrolling new and existing employees into automatic 401(k) plans.

In the study, Automatic 401(k) Plans: Employer Views on Enrolling New and Existing Employees, the majority of large employers—those with 500 or more employees— were very familiar or somewhat familiar with the concept of automatic enrollment and the concept of automatic escalation, which gradually increases the amount employees set aside into their 401(k)s over time.

The survey found that 42 percent of large employers who offer 401(k) plans also offer automatic enrollment, and 28 percent provide an automatic escalation feature. The majority of companies offered the automatic option to new employees, and more than one-third (35 percent) enrolled all eligible employees.

Among large employers that provide 401(k) plan—whether automatic or not—nearly three-quarters said they believe automatic features help employees save for retirement. Almost half said it’s easier to pass nondiscrimination testing with these features, and more than a third said it demonstrates social responsibility. Implementing automatic 401(k)s can also reduce plan pricing or plan provider fees. These attitudes help explain why adoption of automatic features is on the rise: according to a separate survey, by the Profit Sharing Council of America, almost 40 percent of all company plans offer automatic enrollment, up from 24 percent in 2006.

What about those companies that are not offering automatic features? When asked why they do not have automatic enrollment for their 401(k) plan, employers most frequently cited employee-related challenges such as a concern that employees would not like automatic enrollment (30%), as the major reason for not implementing automatic features. This anxiety may be misplaced: a study last year by the Retirement Made Simpler (RMS) coalition found that nearly nine out of ten employees who participate in automatic enrollment or automatic escalation expressed positive views about these benefits.

Saving for retirement is more important than ever, especially with increasing longevity, greater potential for chronic illness in later years and periods of economic uncertainty. By adopting automatic features such as automatic enrollment and automatic escalation in their 401(k) plans, employers can help their employees effectively prepare for retirement.

Read the Study