401k Plan Design: The Power Of “Three Autos”

Ask what some of the most intractable 401k problems are and you’ll likely hear these three issues:

  1. enrollment rates are too low,
  2. savings rates among those who do enroll are too low,
  3. and investment returns generated by plan participants consistently trail market averages.

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As your retirement plan consultant, we are here to help you increase the effectiveness and value of your 401k plan, and one way we are doing this is by advocating  the following three “auto” – solutions:

  1. Automatic Enrollment: Enroll all employees in the plan as soon as they become eligible, unless they take specific action to opt out.
  2. Automatic Savings Acceleration: Increase participants’ savings rates by a fixed percentage each year, until they hit a specific ceiling, unless they deliberately opt out.
  3. Automatic Default: Use target-date or lifestyle options, instead of stable value or money market options, as the default for participants who do not select an investment option.

For more information on how the “three autos” drive participant behavior, please contact us.

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    401k plan design
About Peter Philipp, CFA, CFP®

Peter Philipp specializes in employee benefits and investment management for businesses and individuals. In 1993, he helped launch the world’s first target-date funds, a concept which has become the cornerstone of today’s 401(k) plans. Peter holds both the Chartered Financial Analyst designation and the CERTIFIED FINANCIAL PLANNER™ certification, an elite distinction since less than half of 1% of all financial advisors are “dually‐certified.”


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