Automatic enrollment quadruples over three-year period among retirement plans run by Vanguard
About 20% of the defined contribution plans administered by The Vanguard Group Inc. had adopted automatic enrollment by the end of last year, up from just 5% three years earlier, according to a recent study by Vanguard.
About 20% of the defined contribution plans administered by The Vanguard Group Inc. had adopted automatic enrollment by the end of last year, up from just 5% three years earlier, according to a recent study by Vanguard.
“How America Saves 2009” also found that employees covered by automatic enrollment plans at the Malvern, Pa-based mutual fund company had an overall participation rate of 84%, compared with 60% for plans with voluntary enrollment.
At the end of 2008, about half of Vanguard’s 2,200 defined contribution plans had designated a qualified default investment alternative and, of those, 85% chose a target date mutual fund.
“This means that more people are being defaulted into [target date funds],” Vanguard spokeswoman Linda S. Wolohan said yesterday.
The survey also found that decreases in participant account balances were not as drastic as might have been expected.
Participants who had balances both at the start and end of the 2008 experienced a median decline of 14%.
The median decline for pre-retirees — those ages 55 to 64 — was 16%.
On average, participants contributed 7% of their salaries to their retirement accounts in 2008, compared with 7.3% in 2007, the survey found.
The drop is due to the 3% deferral rate set by many automatic enrollment plan sponsors, said Vanguard.
The survey, which was released Aug. 19, looked at the behavior of more than 3 million participants.
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