By David Pitt, AP Personal Finance Writer
DES MOINES, Iowa (AP) — So many things in our lives are automated these days. Your paycheck may be automatically deposited in a bank account and automatic bill pay has become more widespread. The same ease has come to retirement accounts in a very big way. Auto enrollment, auto escalation and auto rebalancing are increasingly popular.
About 60% of companies with 401(k) plans automatically deduct a portion of a new worker's pay and put it in a retirement account.
Auto enrollment and other automatic features in 401(k) plans grew rapidly after the Pension Protection Act of 2006 gave companies the authority to automatically enroll workers in an effort to get more people to save for retirement.
Various studies indicate that between one-fourth and a third of eligible 401(k) participants do not enroll.
The number of companies offering auto enrollment has increased by about 10% a year for the past three years, said Pamela Hess, director of retirement research for Hewitt Associates, a human resources consultant. Another 12% of companies indicate plans to add the feature this year, according to a Hewitt survey released last week.Companies can boost a 60% participation rate to 90% or more by adding auto enrollment, said Dean Kohmann, vice president of 401(k) plan services at Charles Schwab & Co.
"We know when auto enrollment is added a vast majority of employees will stay in the plan," he said.
Still, government regulations require retirement plan providers to clearly inform workers about their rights to opt out of a plan.
A Vanguard study, for example, found 45% of newly-hired workers would voluntarily participate in a 401(k) plan. However, participation soared to 86% in companies that automatically enrolled workers when they were hired.