Despite growing awareness of the benefits of automatic features like auto-enrollment and auto-escalation, many smaller 401(k) and 403(b) plans still trail larger ones in adopting them. According to Vanguard’s “How America Saves” report, only 24% of smaller plans use auto-enrollment compared with 61% of larger plans, yet participation rises from 52% to 82% when this feature is implemented. Smaller organizations often face challenges such as limited staff, high turnover, and concerns that lower-paid employees can’t afford to contribute. Others view automation as overly paternalistic or worry about added administrative complexity and employer match costs.
Retirement plan advisors (RPAs) play a critical role in breaking this inertia. With over 90% of small plans already relying on an advisor, RPAs can champion an “ideal plan design” that includes auto-enrollment at 6%, annual 1% auto-escalation up to 12%, and professionally managed options like target-date or managed accounts. These features can significantly increase participation and account balances without raising fiduciary risk—especially when paired with payroll integration and clear employee communication. Barstein encourages advisors to help plan sponsors benchmark against peers, educate their committees, and position auto features as a simple, cost-effective way to strengthen retirement outcomes and employee retention.
Read more in Fred Barstein’s latest Wealth Management article, “Why Some 401(k) Plans Still Resist Auto Features.“
