Article:
Automatic 401(k) Reenrollment: What This Means for You
A new trend in company retirement plans has been gaining traction – 401(k) plan “reenrollment.” This trend involves companies automatically enrolling workers into their workplace 401(k) plan if they are not currently participating. While automatic enrollment typically applies to new hires, reenrollment applies to all workers who are not currently saving in the 401(k) plan.
According to a recent survey by the Plan Sponsor Council of America, 10% of companies that offer a retirement plan now reenroll workers into their 401(k) every year, which is up from 4% a decade earlier.
Sean Deviney, a certified financial planner based in Fort Lauderdale, Florida, highlighted the benefits of reenrollment, stating that employees often make their 401(k) election when they’re hired and never revisit it. Most companies direct workers’ savings into target-date funds if they’re automatically enrolled, and workers receive a notification ahead of reenrollments where they have the chance to opt out or reduce their contribution.
Deviney also mentioned that some companies may choose to reenroll workers who are already participating in the 401(k) plan and increase their savings rate. By doing this, companies aim to improve worker finances, boost employee productivity, and happiness, as well as save money on future payroll and health costs.
However, not all companies are keen on adopting reenrollment policies due to concerns about being too paternalistic or raising employer costs too much, especially for companies offering a 401(k) match.
Overall, automatic 401(k) reenrollment is a growing trend in the workplace and one that has the potential to impact workers’ retirement savings and overall financial security.
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