Automatic enrollment of participants in 401(k) plans, which was
encouraged by the Pension Protection Act of 2006, was designed to
overcome the drawbacks of voluntary enrollment by getting more
employees to save in their workplace retirement plan. Since that
time, automatic enrollment for 401(k) plans has been demonstrated
by Employee Benefit Research Institute research to have substantial
benefits for some employees.
Besides helping your employees save for retirement, automatic
enrollment addresses some retirement plan and administrative
issues. For instance, it may help solve non-discrimination testing
failures and reduce, or eliminate, the need to issue refunds.
But what to do about plan investments? With automatic enrollment
comes a fiduciary duty to direct plan investments for those
automatically enrolled participants that do not choose a place to
invest their contributions. To address this concern, the Department
of Labor (DOL) created a regulatory "safe
