BOSTON (TheStreet) -- Automatic enrollment in 401(k) plans, touted by President Barack Obama as a way to increase retirement savings, is gaining in popularity, even as the stock-market crash wiped out more than $1 trillion in retirement accounts, two studies show.
Automatic enrollment isn't new, but its use has risen dramatically since the federal Pension Protection Act of 2006 encouraged adoption of automatic 401(k)s and provided legal clarification on existing state laws.
Automatic enrollment enables companies to provide employees a 401(k) plan with an "opt out" alternative. Traditional plans require employees to "opt in."
Automatic enrollment could boost 401(k) participation rates from a national average of about 75% of eligible employees to as much as 95%, according to the Retirement Security Project, an advocacy group partnered with Georgetown University and the Brookings Institute. Nationwide, about 75 million workers don't have access to an employer-sponsored 401(k), according to the organization, which estimates that automatic-retirement plans could boost U.S. savings by as much as $8 billion a year.
The increase in savings would be a boon for asset managers like T. Rowe Price (Stock Quote: TROW), Legg Mason (Stock Quote: LM), Fidelity and Vanguard. At the end of last year, Americans held about $14 trillion in retirement assets, $3.5 trillion of which was from employer-sponsored direct-contribution plans, which tend to be managed by the largest investment firms.