On an annual basis, more companies are conducting 401(k) plan reenrollments. This distinguishes it from automatic enrollment, which is typically reserved for new personnel and allows other participants who do not currently save through the company's 401(k) to do so. Certain employers may even reenroll those who do not contribute a minimum portion of their salary.
If you have chosen not to engage in your company's 401(k) plan, your employer may have other plans. The concept of 401(k) plan "reenrollment" has been increasing in prevalence. This means that companies are more commonly settling on automatically placing workers into their workplace plan if they are not currently enrolled. While automatic enrollment, which is also increasingly widespread, usually applies to new recruits, reenrollments usually affect all employees who are not already saving through the 401(k). As of 2022, around 10% of companies providing a retirement plan reenroll workers into the 401(k) annually, according to a recent poll conducted by the Plan Sponsor Council of America, a trade association. This rate has grown from 4% in the last decade.
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Sean Deviney, director at Provenance Wealth Advisors in Fort Lauderdale, Florida, stressed the value of retirement security and the need to help boost workers' savings. He noted, "A lot of times employees make their [401(k)] election when they're hired and never look at it again." PSCA data indicates that about 85% of companies direct workers' savings into target-date funds if they are on auto-enrollment. Ahead of re-enrollments, workers are notified by their employer and can choose to opt out or reduce their contribution; employers hope inertia will keep the worker within the plan.
Some companies may choose to do this as a one-time event rather than annually, Deviney said. Other companies may opt to re-enroll workers already participating in the 401(k) plan, but increasing their savings rate.Companies may have a long-term financial gain from such policies. For instance, better worker financial standing could raise employee productivity and contentment in the workplace, which may enable them to retire sooner and in turn, save money for companies on future wages and health costs.Companies may choose not to implement reenrollment policies due to fear of seeming overly controlling or due to a possible rise in employer costs especially if offering a 401(k) match, Deviney mentioned.
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