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Automatic 401(k) Plans: Employer Views on Enrolling New and Existing Employees

In the past few years, a growing number of employers have added automatic features, especially automatic enrollment, to their 401(k) plans.  This national telephone survey of large employers with 401(k) plans was conducted in order to better understand large employer attitudes toward and experiences with two automatic 401(k) features: automatic enrollment and automatic escalation.

The survey's key findings include the following:

  • The vast majority (94%) of employers surveyed report that they are either “very familiar” or “somewhat familiar” with automatic enrollment in 401(k) plans.   While familiarity with automatic escalation is lower than familiarity with automatic enrollment, a majority (78%) of employers also report that they are familiar with automatic escalation.
  • Although nearly all large employers with 401(k) plans are at least somewhat familiar with automatic enrollment, the majority have not adopted it for their own 401(k) plan.  Specifically, less than half (42%) of respondents report that their 401(k) plan includes automatic enrollment.  Fewer (28%) report that their 401(k) plans have an automatic escalation feature.
  • The majority (58%) of employers with automatic enrollment report that they automatically enrolled only new hires when they first adopted automatic enrollment.  Just over one-third (35%) automatically enrolled all non-participating employees who were eligible for the plan.
  • Of those employers who automatically enrolled only new hires at adoption, only about one in ten (11%) report that they have automatically enrolled all non-participating employees at least once since adopting automatic enrollment.
  • Employers were most likely to identify the following as “major reasons” that companies offer automatic features: it helps employees save more for retirement (74%), it is easier to pass nondiscrimination testing (49%), and it demonstrates that we are a socially responsible company (35%)
  • When asked why they do not have automatic enrollment for their 401(k) plan, employers without automatic enrollment most frequently cited employee-related challenges such as a concern that employees would not like automatic enrollment (30%), costs (20%), contentment with the status quo (14%), and a lack of information (10%).
  • When employers without automatic escalation were asked to explain their reasons for not including this feature in their 401(k) plan, the most frequent responses also related to employees and included the company thinks employees would not like it (66%) and the company thinks employees would find it confusing (52%). Additionally, one-third of employers without automatic escalation (35%) indicated that the company is concerned about matching costs.
  • Employers that automatically enroll only new hires were asked why they do not automatically enroll all non-participating employees who are eligible for the plan.  As with the reasons expressed for not having automatic features, employee-related challenges were also the reasons most frequently expressed for limiting automatic enrollment to new hires.

AARP commissioned Woelfel Research, Inc. to conduct this telephone survey of 806 large employers with 401(k) plans.  Partial funding was provided by Retirement Made Simpler, a coalition formed by AARP, the Financial Industry Regulatory Authority (FINRA), and the Retirement Security Project (RSP).  For more information, visit  The survey was fielded from December 15, 2009, to February 24, 2010, and results were weighted by company size.  For more information on the survey, please contact S. Kathi Brown of AARP Research & Strategic Analysis at 202-434-6296.