Automatic enrollment blossomed and more employees began to save forretirement. You'd think this would have made everyone happy. It didnot. (Photo: Shutterstock)

It's a struggle the retirement industry – from plan sponsors toservice providers to regulators and public policy makers – has beentrying to tackle since Ted Benna first discovered the Easter EggCongressman Barber Conable hid under IRC Sec. 401(k) in the RevenueAct of 1978.

And yet, in the last few months, have we discovered the benefitof something we have for so long been trying to prevent?

The fourth quarter of 2018 saw the market dip intonear-correction territory. The return of the usual volatility ofthe equity markets may have allowed us to stumble upon anheretofore overlooked advantage of QDIOs (see “Recent Market Volatility Has Revealed This AboutTarget Date Funds,” FiduciaryNews.com, January 15,2019).

Congress formalized in the 2006 Pension Protection Actdecision-making inertia to help, rather than prevent, employeessave more for their retirement. For any number of reasons, far toomany workers were not opting into their 401(k) plan.

By switching the decision from an opt-in to an opt-out,automatic enrollment blossomed and more employees began to save forretirement.

You'd think this would have made everyone happy. It did not.Many felt a need to press employees to become more engaged in theircompany's retirement plan.

In fact, with greater participation, there was an expectationgreater engagement would result. It did not. For a very obviousreason.

An employee accepts the default investment option becausethey're predisposed to not thinking about the “hard stuff” (i.e.,investments) of their retirement plan. If employees don't want tothink about their retirement plan, why would they ever want to“engage” with it? They won't.

For years, many considered this lack of engagement a bad thing.It was hoped more engagement would lead to more savings, betterfinancial decisions, and a more comfortable retirement.

This may be all well and true. The push for greater financialliteracy is a noble one and we must continue to pursue it.

But understanding personal finances and engagement in one'sretirement plan are not necessarily the same thing.

It turns out, that may be a good thing.

The greatest fear of the financial industry is people buyinghigh and selling low. Wild gyrations in the market (both on theupside and the downside) can lead to this detrimental behavior.

The common advice professionals offer during periods ofheadline-making volatility is “turn off the TV and don't read thenewspaper.” More directly, they say to ignore the short-term swingsbecause retirement investing is a long-term proposition (even whenyou're retired).

Maybe all that lack of engagement helps employees ignore themarket's impact on their retirement savings. This becomes a majoradvantage of the “forget it” part of “set it and forget it.”

Perhaps those 401(k) do-it-yourselfers might want to take alesson from their less engaged peers when it comes to reacting tomarket volatility.

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401(k) participants say the darndest things —Carosa

Participant engagement makes 401(k) sponsors happy— Carosa

It's time to talk about investment performance —Carosa