Of all the changes a plan sponsor can make to improve participation and improve their employees’ ability to retire adding auto enrollment and auto escalation will be the most effective. Most plan participants are looking to their employer for guidance. You, the employer, have significant influence on how your employees save for retirement.

Because many 401(k) plans were started before the advent of target-date funds, lifestyle funds or managed accounts, many long-term participants did not have an opportunity to select those funds when they entered the plans, he said.“There is evidence that once participants have made their initial elections, they make few, if any, changes— the so-called inertia effect. As a result, a re-enrollment process causes participants to revisit their investment preferences and their objectives and to decide whether to accept the default into QDIAs,” he said.

Re-enrollment improves participant investing, but fiduciaries also receive important protections if they follow the default process as outlined in the DOL regulation. For participants who default, plan fiduciaries are responsible for investing their money and may be liable if they don’t use QDIAs. Also, according to the report, fiduciaries are only protected from imprudent participant investment decisions if the plan complies with the requirements of ERISA 404(c).

Auto enrollment and auto escalation are the best methods to increase plan participation and help more Americans successfully retire. I propose that we convert the 401(k) plan into more of a pension fund like plan. Turning over the plan to professionals will add discipline and success.

Please comment or call to discuss how your company 401(k) plan can be improved for all.