S aking h
RE-ENROLLMENT is a plan design strategy that helps many employees better their retirement
outcomes by increasing participation and deferral rates and/or improving investment allocations.
And yet, 89.3% of sponsors surveyed for the 2016 PLANSPONSOR Defined Contribution (DC)
Survey said they had re-enrolled no employees or participants in the past 12 through 18 months.
Among those that had, 1.9% re-enrolled participants not invested in the default investment, 4%
re-enrolled participants saving below the default deferral rate, and 8.6% re-enrolled nonparticipating employees.
For many plan sponsors, re-enrollment remains a relatively new concept, says Lynda Abend,
chief data officer at John Hancock Retirement Plan Services in Boston. “Automatic enrollment
really started with the PPA [Pension Protection Act], so it’s about 10 years old. It took four or
five years before employers got comfortable with it, and then most automatically enrolled new
employees at 3%,” she says. “In the past five years, we’ve made good progress in working with plans
that had auto-enrolled at 3%, [prompting them] to move to a higher initial deferral, and getting
sponsors comfortable with auto-increases. Now, the next step in this evolution is re-enrollment.”
Re-enrollment can improve participants’ investment diversification, get participants on track
to defer enough for their retirement, and bring nonparticipating employees into a plan. “If a plan
sponsor cares about the financial well-being of its work force, [it] should care about this. And if
a plan sponsor cares about employees transitioning into retirement in an orderly way, [it] should
care about this,” says Jerry Patterson, senior vice president of retirement and income solutions at
Principal Financial Group in Des Moines, Iowa. “There is no tool, no calculator, no seminar that
can do for your employees what we together can do through best-practice plan design.”
Re-enrollment can take various forms and be used to accomplish several purposes, the main
of which we discuss on the following pages.
The case for re-enrollment
to improve participant outcomes