A high tech retailer in NJ has gotten aggressive with their 401(k) plan as related by their HR Coordinator at a TPSU (The Plan Sponsor University) program held at Rutgers University. This 130+ employee company recently implemented auto-enrollment and re-enrollment starting at 5% deferral with auto escalation at 12%. Let’s dive deeper into how that’s working.
The NJ retailer employs young tech savvy people, many working remotely with some out of the country, so it’s hard to get everyone together in person. Though they like to do things for themselves online, the workers often need a nudge to do the right thing like enrolling in their 401(k) plan which is why the company implemented auto-enrollment. In addition, employees don’t like handing in forms and talking about what may be a difficult issue for younger workers – retirement.
Just as important, auto-enrollment takes a lot of the manual work from the HR Coordinator which is critical as she has to manage many other responsibilities.
Auto-enrollment is a great start but without auto-escalation, it can be harmful just as deferring at too low a rate can be. Employees are plagued by inertia and tend not to make changes. Auto-enrolling at a low rate can be seen as a signal that the employer thinks that the rate is all that is required for a healthy retirement. And if auto-enrollment is good for new employees, why not use it for current ones who might have put off enrolling when they first joined the company.
The NJ HR professional had been to a TPSU program where the “Ideal Plan” using auto features is touted giving her the confidence to bring the idea to her company. She came back to TPSU not just for the expert lecturers but mostly to interact with peers to learn ways to get management better engaged with efforts to improve their retirement plans as well as the comfort to know that she is not alone when she gets frustrated and confused. This is tough stuff and people managing their company’s retirement plan need help.
