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Fidelity Investments has encouraged employers to adopt automatic enrollment features in their 401(k) plans for years. Now the largest provider of K plans will automatically enroll the small percentage of its 32,500 employees not participating in a retirement plan starting Jan 1.
"We need a new generation of plan design in America's workplaces," says Robert Reynolds, Fidelity's vice chairman and chief operating officer. He announced the company's move to automatic enrollment Sept. 21 before members of the Greater Boston Chamber of Commerce.
Automatic enrollment is "the way to break inertia and jump-start savings," Reynolds notes. He encourages plans that enroll participants automatically to give strong warnings to anybody who chooses not to participate.
"And I mean really strong warnings," he advises. "Something like, Failure to maximize your K-plan savings may force you to beg from your kid.'"
Reynolds envisions automatic enrollment as only the first step in a broader redesign of defined contribution plans. For example, he recommends that employers:
* provide automatic escalation of deferrals that guide participants into saving more
* include a lifecycle fund as the default option, and
* require that terminated plans automatically be placed in age- appropriate lifecycle funds or annuities.
"We believe this is the real path to empowering...