Related: Ready to implement SECURE 2.0? Manual HR processes will leave organizations scrambling

Defaulting people onto a path with automatic enrollment and automatic escalation is a very effective inclusion strategy to help establish healthy savings and investing habits and to gain positive savings momentum. The provision in the SECURE 2.0 Act of 2022 (SECURE 2.0) that requires automatic enrollment and automatic escalation in most new 401(k) and 403(b) plans will greatly aid the efforts to increase participation and contribution rates. However, for plans created prior to the passing of SECURE 2.0, we believe there are two additional tactics that could prove beneficial:

Adjust plan design to default new employees into their employer-sponsored plans with the option to opt-out rather than leaving it as a choice when hired. The greatest success comes when automatic escalation is included in the design. Reason being, automatic enrollment will get employees into the plan and then automatic escalation provides a gradual approach to increasing their deferral rate while generally not having a large impact on their paychecks.
Re-enroll (or auto-sweep) employees who are not participating in the plan to make another conscious decision to contribute or not. Similar to the concept of annual elections for benefits like health, dental, and vision, re-enrollment would allow employees to re-evaluate their previous approach to retirement saving to gain alignment with their financial goals.

Individuals tend to have a high degree of trust in financial professionals, retirement plan service providers, and employers. It's important our three entities continue collaborating in ways that better help people start and move along their financial journeys with confidence.

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The power of auto-enroll (& auto-sweep): What moves the needle in retirement savings

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