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Automatic Enrollment

401(k)s can help everyone save

Automatic enrollment is the simple way to help employees join your company's 401(k) plan. It works just like it sounds. Your employees are automatically enrolled in your plan, though they can opt out at any time. You determine what percentage of each employee's gross pay to put in (3% is the most common choice), and that's it in a nutshell. Auto-enrollment is a relatively new option: Uncle Sam has allowed it since 2006 as part of the Pension Protection Act.

Employees who want to keep the plan can use our easy, educational online enrollment program. There they can choose any contribution amount they want as well as select from any of the low-expense, diversified investments we offer.

Those who do not actively go through our online setup enrollment will simply have a small percent taken out of each paycheck deposited in their 401(k) account. The money will be invested in a model portfolio made up of stock and bond funds to help these employees save for their futures.

401(k) participation rates

Become the savings hero your employees want

Most employees – 69% in one study1 – would prefer to be automatically enrolled.

The average 401(k) participation rate is only 66%.2 But when auto-enrolled, participation jumps to 92%.2

The great thing is that since most employers choose to have this as a pre-tax contribution, the effect on employees' take-home pay is a lot less than most expect.

Helping employees save really pays off

Here are some great rewards for choosing automatic enrollment:

  • You are helping employees prepare for tomorrow – something most folks have difficulty doing. That can make a real difference in people's lives!
  • Loyalty and retention at most companies improve when more people use the 401(k) plan, ultimately saving you time and money. Read about the Real Costs of Employee Turnover to get the full skinny.
  • If you purchase a non-Safe Harbor 401(k) plan, it will help you and any other highly compensated employees contribute more to your 401(k) plan, plus it can help you pass the "dreaded" discrimination testing the government requires.

It's simple to start & maintain

Putting ShareBuilder 401k auto-enrollment in place is pretty darn easy. Here's what you do:

  1. Select auto-enrollment during the online purchase process.
  2. Choose a default investment option from several model portfolios. It's only for employees who don't make their own choice. Most customers choose the Conservative portfolio, but all choices except Aggressive are available.
  3. Select the default contribution amount you want to put into your employees' 401(k) accounts. 3% is the most common selection. Higher amounts may help you and higher paid employees put more into their account.
  4. Tell your employees the following things before rolling out your plan (we're happy to help with communications):
    • The default contribution percentage
    • The model portfolio where funds will be invested if no selection is made
    • How to enroll online (we provide a standard email for this)
    • How to change their contribution amount, and select a different portfolio
    • How to opt out
  5. Send an annual reminder to those who are using the default selections.

You can adjust the default contribution percentage and investment selection annually if you like.

That's the scoop. At the end of the day, Automatic Enrollment helps all employees get involved in saving for their future and reducing their tax burden. A win-win for sure. And as for down the road? Well, the best is yet to come.

Next Steps

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800-943-6108 x1