|News from NIPA.org, September 7, 2011|
NIPA's bi-weekly e-newsletter, News from NIPA.org, delivers the most up-to-date industry and association news.
Automatic Enrollment Sparks Debate
This article prompted almost immediate commentary regarding the pros and cons of automatic enrollment. Among those commenting negatively on the article was the Employee Benefit Research Institute, the group who prepared the study, quoted in the article. Their response is entitled "What Do You Call a Glass That is 60-85% Full?” EBRI comments that while the article said that automatic enrollment is reducing savings for some participants, it failed to mention that automatic enrollment is "increasing savings for many more – especially the lowest-income 401(k) participants.” EBRI notes that the "entire point’ of its study for The Wall Street Journal was to determine "how valuable the proper choice of plan design and worker education can be.” It criticized the Journal for reporting "only the most pessimistic set of assumptions” and not citing any of the other 15 combinations of assumptions reported in the study. EBRI argued that the article did not report the positive impact of automatic enrollment on many workers.
According to EBRI, its "simulation results” using in the study showed that about 60 percent of workers would be better off in an automatic enrollment plan as opposed to similar participants covered under a plan without such a provision. That percentage of participants increases to 85 percent for the plan that includes automatic escalation provisions. EBRI acknowledged that as with any change, some people will not have the desired results. Where the focus of automatic enrollment is to increase participation among lower-income participants, "objective analysis suggests auto-enrollment does obtain that goal.”
Reprinted with permission from 401(k) Advisor
Have a comment on a recent NIPA News story?
Keep the conversation going and visit us on LinkedIn!