Automatic enrollment in 401(k) and other retirement plans has gained popularity as a tool to boost participation rates and encourage employees to save for their future. One of its biggest advantages is that it removes inertia—employees are automatically enrolled unless they opt out, which significantly increases participation rates. This is especially beneficial for low- and middle-income workers who might otherwise delay or overlook retirement planning. Additionally, automatic enrollment can improve financial security by helping employees start saving early, benefiting from compounding interest over time. Employers also stand to gain, as higher participation rates can lead to better plan pricing and compliance benefits, ultimately making the retirement plan more cost-effective and attractive to employees.
However, automatic enrollment is not without its challenges. For industries with high turnover rates, such as manufacturing and healthcare, enrolling employees who may leave within months can create administrative burdens and unintended financial complications. Additionally, some employees—particularly low-wage earners—may struggle with reduced take-home pay, leading them to opt out anyway or withdraw funds prematurely. Another concern is that some automatically enrolled employees stay at the default contribution rate, which is often too low to ensure adequate retirement savings.
Jennifer Bartlett, a consultant at Fahrenheit Advisors, highlighted these challenges in a recent TPSU program on the campus of Randolph-Macon College, where she was interviewed by Fred Barstein, CEO of TPSU, TRAU, and 401kTV. Bartlett emphasized that while automatic enrollment can be effective in some industries, it presents difficulties for companies with high workforce turnover. In manufacturing and healthcare, many employees are multilingual and new to the U.S. retirement system, making it harder for them to understand the benefits of automatic enrollment. Instead, she advocates for strong advisory support, one-on-one meetings, and targeted educational programs to help employees make informed decisions about retirement savings.
While automatic enrollment is a powerful tool for increasing participation, employers must carefully evaluate workforce demographics, financial literacy, and employee needs to determine the best approach. Whether through auto-enrollment or enhanced education strategies, the goal remains the same—helping employees secure a stable financial future.
Read the Full Transcript Here:
Fred Barstein:
Greetings. This is Fred Barstein, CEO and founder of TPSU, TRAU and 401kTV. I’m here on the campus of Randolph-Macon College in the Richmond, Virginia area where we just completed a TPSU program, and I’m here with Jennifer.
Welcome, Jennifer.
Jennifer Barlett:
Thank you.
Fred Barstein:
Okay if we ask you a few questions?
Jennifer Barlett:
Of course.
Fred Barstein:
Okay. Tell us a little bit about you and your firm.
Jennifer Barlett:
I’m Jennifer Bartlett. I work with Fahrenheit Advisors. They’re the consulting arm of Smith and Howard, which is a tax accounting and advisory firm. I work in the human capital space, so filling in as a fractional CHRO and consulting. And then we also do finance and accounting and sales advisory and business advisory consulting as well.
Fred Barstein:
One of the things we always talk about is the first thing in a retirement plan is you got to get people to participate.
Jennifer Barlett:
Yes.
Fred Barstein:
What do you find are the methods that are most successful for getting participation rates up for your clients?
Jennifer Barlett:
I really try to get clients to get good advisors in the door and good administrators that are providing them with the materials that they need to educate their workforce to increase participation, getting them on site for one-on-ones, having breakout groups for the different level of participants within there, and really trying to educate people about why they need to save for retirement.
Fred Barstein:
So why not just do automatic enrollment?
Jennifer Barlett:
I work a lot in high turnover industries like manufacturing and healthcare, and it’s hard to do auto-enrollment for low wage earners and for high turnover industries, and it often doesn’t work for the company. Additionally, in manufacturing especially, there’s a lot of multilingual participants that don’t really understand what their retirement investment is, and they’re new to the country and often don’t know how we save for retirement here in the US.
Fred Barstein:
So final question, what do you think is the greatest benefit of a plan sponsor attending a TPSU program?
Jennifer Barlett:
I found it super educational. It’s been a while since I’ve done much research on 401k plans, and I really wanted to increase my knowledge and there were great presenters, both from advisors and record keepers and different fiduciaries that assist us. It was just… Well, they aren’t the fiduciary. Well, sometimes they are, but it was just great to interact with a lot of people from different industries, hear what the troubles are that they’re having, and really just glean everything I could out of it.
Fred Barstein:
Thank you for your time today.
Jennifer Barlett:
Thank you.
Fred Barstein:
And thank you for watching 401kTV. Please stay tuned.
