WESTWOOD, Mass., Dec. 5, 2012 /PRNewswire/ -- Updating recent auto-enrollment research across its retirement clients, New York Life Retirement Plan Services found that over time, plans with auto-enrollment saw steady deferral increases and sustained high participation, versus the opposite in plans without auto-enrollment.
According to the New York Life study examining plans with auto-enrollment versus those without it over four years through Dec. 31, 2011, plans employing this feature achieved 93% participation in the first year of auto-enrollment and 87% after four years. By contrast, plans without auto-enrollment generated a participation rate of 37% in year one and 56% in year four. Additionally, in plans with auto-enrollment, the average participant deferral rate was 4.65% the first year and grew to 6.1% in year four. In plans without this auto feature, deferrals started high, at 7.29% in the first year, but declined to 6.77%. Essentially after four years, auto-enrolled participants' deferral rates caught up to those who self-enrolled.
"Many plan sponsors and their advisors have been looking for solid proof that auto-enrollment works, and here it is," said David Castellani, CEO of New York Life Retirement Plan Services, a leading provider of retirement solutions to U.S. corporations and unions. "Plain and simple – auto-enrollment encourages participant deferral rates. There isn't a logical argument not to employ auto-enrollment."
New York Life's research earlier this year showed that plans auto-enrolling their participants at higher deferral rates have lower participant opt-out rates and higher participation overall.
The 2012 analysis is based on 480 plans and 800,000 participants across New York Life's retirement platform. Auto-enrollment in 401k plans was encouraged in the Pension Protection Act of 2006. The number of plans on the New York Life platform that have adopted auto-enrollment climbed to 64% as of September 30, 2012, compared with 21% in 2006.
About New York Life Retirement Plan Services
New York Life Retirement Plan Services offers bundled retirement plan solutions and defined contribution investment only products throughout the United States. New York Life Retirement Plan Services, a division of New York Life Investment Management LLC, administers more than $43 billion in bundled retirement plans as of September 30, 2012. With offices in Westwood, Massachusetts, Parsippany, New Jersey, and San Francisco, New York Life Retirement Plan Services is widely recognized for its leadership within the retirement plan industry.
SOURCE New York Life Retirement Plan Services