401k Auto Plan Features Attract Attention
401k auto plan features such as auto enrollment and auto escalation are top of mind for the entire defined contribution industry. A healthy discussion has ensued on the topic of the 401k auto plan features – auto enrollment and auto escalation.
Mark Iwry, a Nonresident Senior Fellow in Economic Studies at Brookings and former Senior Adviser to the Secretary of Treasury during the Obama administration, who helped draft the 2006 Pension Protection Act, recently contacted 401kTV as the result of one of our plan sponsor videos.
Mr. Iwry requested clarification around a 401kTV interview conducted with a plan sponsor CFO on the topic of 401k plan auto enrollment and auto escalation. (At the conclusion of Fiduciary Education Programs of The Plan Sponsor University – TPSU – 401kTV frequently interviews program attendees for the benefit of those who could not attend the program.) In this case, the CFO interviewed expressed concern with the additional risk, including fiduciary risk, that might be present in their retirement plan if they were to add the 401k auto plan features of auto enrollment and auto escalation.
When contacting 401kTV, Mr. Iwry referenced, the IRS Employee Plans Compliance Resolution Program (EPCRS) for fixing retirement plan errors. (A program that Mr. Iwry arranged for the IRS to issue, several years ago.)
The EPCRS program has dampened the apprehension around 401k auto plan features while changing the conversation around auto enrollment and auto escalation. Recognizing the possibility that an occasional administrative glitch always exists, the EPCRS is a suitable remedy for such occurrences. However, these types of administrative errors ordinarily do not rise to the level of being fiduciary issues. Today, thousands of plan sponsors have implemented these 401k auto plan features without fiduciary concerns. At TPSU Programs over the years we have frequently shared first-hand accounts from plan sponsors and plan fiduciaries whose plans have experienced measurable growth in participation rates and savings rates. See for yourself.
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