Beware this one downside to automatic escalation
There’s no shortage of benefits from adding an automatic enrollment feature to your 401(k). But be aware of this one pitfall.
Getting employees to sock money away for retirement is a victory all its own. And adding features like automatic enrollment and automatic escalation can greatly further your crusade.
Since the feds green-lighted an employer’s ability to mandate these features just over a year ago, many of your peers have been fast to add them.
With good reason – check out the predicted positive impact of auto escalation on overall 401(k) accumulations:
- Between 11% and 28% for participating employees in the lowest income quartile, and
- Between 5% and 12% for participating employees in the highest income quartile.
That comes from the Employee Benefits Research Institute.
But be careful! There seems to be a real downside to automatic escalation: Employees don’t save as much as they could!
Under most auto escalation features, employee contributions increase from a starting 3% to a top out of 6%. That’s far short of the 15% allowed by law.
So employees may be shortchanging themselves on the savings. Be sure to remind folks just how much they could be setting aside for their golden years.
Free Training & Resources
Webinars
Provided by Yooz
White Papers
Provided by Anaplan
Further Reading
Federal and state courts hearing overtime pay disputes will always defer to the maxim that the employer must prove employees aren’t s...
It’s no surprise that a medical expense like a dental exam can be paid or reimbursed under an HSA, but what did IRS recently say abou...
Financial wellness programs often sound expensive or complex, but the truth is that one simple step — helping employees better unders...
It’s easy to take your company’s payroll technology for granted, that is, until something goes wrong. As your business grows and the ex...
The standard for determining who’s a joint employer has changed, due to a final rule from the National Labor Relations Board (NLRB). ...
If someone qualifies as exempt from the overtime requirements of the Fair Labor Standards Act (FLSA), is an exempt classification mandatory...