Enrolling Employees in 401(k) Plans Is Not Enough, Study Says

Saving struggles: Even with programs that automatically enroll employees in 401(k) retirement plans, employees are still struggling to save for retirement, according to a study by Hewitt Associates. In a related study, the Employee Benefit Research Institute said participation of full-time workers in employer retirement plans fell to 53 percent in 2007 from 55 percent in 2005. As a result, plan sponsors are not only increasing automatic enrollment efforts but are focusing on making sure their plans enroll employees in ways that maximize retirement savings.

In 2007, 34 percent of companies automatically enrolled their employees in their 401(k) plans. Of that number, 77 percent defaulted employees into diversified portfolios such as target-risk, target-maturity or balanced funds, up from 35 percent in 2005. More companies are also setting default contributions 3 percent higher. Another goal of plan sponsors is to make investing easier for employees. More employers—42 percent—are offering automatic rebalancing of portfolios, up from 26 percent in 2005, and three-quarters of employers surveyed say they offer target-risk and/or target-maturity portfolios, according to the survey.