How One Plan Sponsor Is Rethinking 401(k) Automatic Enrollment

Could a small change to automatic enrollment make a big difference in employees’ retirement savings?

Following a recent TPSU program in Tacoma, Washington, Fred Barstein, founder and CEO of 401kTV and TPSU, spoke with Ruchita, an HR manager at a company with approximately 200 employees.

During the program, Ruchita recognized an opportunity to improve her company’s 401(k) plan design.

While her employer offers a 4% matching contribution, employees are automatically enrolled at just 3%, with contributions increasing by 1% annually.

That means employees who remain at the default contribution rate may miss out on part of the available employer match during their first year.

Her takeaway? Increase automatic enrollment to 4% while keeping the annual 1% escalation.

It’s a relatively simple adjustment that could help employees take fuller advantage of their retirement benefits from the start.

Read the Full Transcript Here:

Fred Barstein: Greetings. This is Fred Barstein, founder and CEO of 401kTV and TPSU. We just completed a program here at the University of Tacoma, in Tacoma, Washington.

And I’m here with Ruchita. Welcome, Ruchita.

Ruchita: Thank you, Fred.

Fred Barstein: Is it okay if we ask you a few questions?

Ruchita: Okay.

Fred Barstein: Great. Before we do, tell our audience a little bit about yourself, the size of your company and your role.

Ruchita: My name is Ruchita, and I’m an HR manager. We have about 200 employees.

Fred Barstein: 200 employees. Okay.

So, one of the things you talked about today was how you’ve been changing the match. What did you do?

Ruchita: So, we used to have—we had a 3% match. Sorry, the company does a 4% match.

But in our plan document, we have an automatic enrollment feature that starts at 3%, with a 1% escalation every year.

Since the company matches 4%, the intent now is to make automatic enrollment start at 4%, with a 1% escalation every year.

Fred Barstein: Right, that’s good. And so, you haven’t done that yet? You’re thinking of doing it?

Ruchita: That’s one of my key takeaways from the class today.

Fred Barstein: That’s what you heard today, yeah.

Ruchita: And I think this is one thing that I’m definitely going to take back to my organization and work on implementing.

Fred Barstein: Very good.

So, that was one of the key takeaways. My final question is, would you recommend TPSU? What benefit do you think plan sponsors get from attending?

Ruchita: Oh, it’s a lot of education.

Mostly, for example, just from today’s lesson, learning what the trends are.

I would not have known, “Oh, if the match is at 4%, why are you starting at 3%?” Employees are losing out on that very important company match.

And there are a lot of things I’ve learned from the participants and all the lecturers we had.

So, for me, it’s a huge benefit to really remind myself of my job as a plan administrator.

What do I do to educate my employees? What do I take back to them so that it’s beneficial for them? How do I educate them?

Fred Barstein: Well, thanks for your time today, and thank you for watching 401kTV. Please stay tuned for more programs like this.

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