Employers that offer automatic enrollment for their 401(k) plans significantly increase employee participation, according to an annual study conducted by Hewitt Associates. The study, which examined the savings and investing habits of over 2.6 million employees, found that the overall participation rate of employees in companies offering automatic enrollment was 14 percent higher than the overall participation rate across all companies.
The study also highlighted that 401(k) participation rates rose last year. In 2005, 36 percent of employees who worked for their company less than one year participated in a 401(k) plan, which was a 6 percent increase over 2004. The Hewitt study noted, though, that almost one-third of the employees surveyed didn’t participate in their employer’s plan at all. Meanwhile, of those that did contribute, 22 percent didn’t contribute enough to receive the full company match, and another 30 percent contributed just enough to obtain the match.
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401(k) Plans for Small Businesses U.S. Department of Labor, Employee Benefits Security Administration