Maryland, Colorado, Indiana, Delaware and Connecticut are exploring the possibility of implementing such programs, under which employers automatically sign up their workers in defined-contribution plans, allowing them to opt out of the plan, rather than waiting for the employee to opt in.

Alaska is the only state to automatically enroll participants in a defined-contribution plan. Gregg Seller, senior vice president at Denver-based Great-West Retirement Services, says executives at the Alaska State Pension Investment Board in Juneau decided to automatically enroll participants into managed accounts of the 401(a) plan, which was launched in July. Great-West administers the Alaska plan.

While Alaska’s decision to implement automatic enrollment was due to a special circumstance—the defined-benefit plan was closed to new employees—Seller says he expects others to follow Alaska’s lead.

Several calls to Richard Shafer, chief investment officer at Alaska State Pension Investment Board, were not returned.

Michael Halpin, executive director of the $2 billion Maryland Teachers & State Employees Supplemental Retirement Plans in Baltimore, says adding automatic enrollment is being “discussed all the time” among board members.

“The big issue for public plans is whether the compensation is already in the employees’ salary that makes automatic enrollment affordable for the state. It’s a very different perspective for corporate plans. But it is something that is being discussed and it is a possibility for us,” he says.

Greater challenge
It is more challenging to implement automatic enrollment in the public sector because state legislatures must specifically allow the feature because of legal issues over garnisheeing wages.

Suzanne Kubec, defined-contribution plan administrator for the $302 million Colorado Deferred Compensation Plan in Denver, says executives of the 457 plan already have discussed adding automatic enrollment with provider Great-West. But she wants to discuss the issue of garnisheed wages.

The Indiana State Deferred Compensation Fund in Indianapolis also is weighing the addition of auto-enrollment to its $660 million 457 plan. Board member Jeff Heinzmann cited the recent passage of the Pension Protection Act as one reason. While public funds are not covered by the act, provisions for corporate plans that allow automatic enrollment and automatic increases in contributions are generating buzz in the public sector.

The Pension Protection Act “brought the issue to the front burner. There are budgetary issues, but the board has discussed it as a possible enhancement,” Heinzmann says.

Leighann Hinkle, deferred compensation administrator for the $250 million State of Delaware Deferred Compensation Program in Dover, says automatic enrollment, while a good idea, depends on how well-funded and generous the state’s defined-benefit plan is.

“It’s a great idea for private-sector companies that are dissolving their DB plans. But with the passage of the [Pension Protection Act], it is on the forefront of everyone’s minds, including state plans,” says Hinkle, adding that Delaware’s $5.6 billion defined-benefit plan is well-funded.

Delaware’s 457 plan provider, Fidelity Investments in Boston, brought up automatic enrollment with the committee, she says.

“[Fidelity] suggested that we take a look at it. We are discussing whether this makes sense for us,” says Hinkle, adding that it will be on the agenda early next year.

Not a top priority
Thomas Woodruff, director of the retirement and benefits division of the Connecticut State Employees Retirement Commission in Hartford, which oversees the state’s $1.5 billion 457 plan, says the board discussed automatic enrollment and sees it as a good idea. But it’s not a top priority.

“There are very different issues for the public sector. For Connecticut, we have a 457, a 403(b) and a 401(a), so that complicates things as well. We have discussed it, though, and it might be added in the future,” Woodruff says.

Nationwide Financial Services in Columbus, Ohio, also is seeing interest. Matt Riebel, president of public-sector retirement plans, says many public plan clients have inquired about automatic enrollment since the Pension Protection Act was signed in August.

“We don’t have any public-sector clients that currently offer [automatic enrollment], but we have several that are very interested and are close to implementing,” he says, declining to name the clients.

“We’re very excited about auto enrollment because today inertia works against us. With auto-enrollment, inertia works in the benefit of folks’ retirement,” he says, adding that the average participation rate in Nationwide’s public-sector plans is 30 percent.

--Jenna Gottlieb is a reporter for Pensions & Investments, a sister publication of Workforce Management.