Automatic enrollment in small-business plans is working

Participation at 83%, versus 58% for plans with voluntary enrollment, Vanguard study finds

Jul 12, 2018 @ 12:08 pm

By InvestmentNews

Corroborating behavioral finance insights on saving habits, a survey by Vanguard of 8,900 small-business retirement plans found that those having automatic enrollment enjoyed an 83% participation rate, versus 58% for plans with voluntary enrollment.

According to the survey, some 63% of employees at businesses that use Vanguard's small-business retirement plan service participated in their 401(k) plan, versus 61% in 2016, Vanguard said in a release.

Taking into account employee and employer contributions, Vanguard found that the average participant contribution rate was 9.7% in 2017, up from 9.3% the year before. The percentage of income deferred increased with job tenure and age, the survey found, from 5.2% for employees age 25 and younger to 10.6% for those age 65 and over.

Almost all of the Vanguard small-business plans — 96% — offer target-date funds as their qualified default investment alternative. More than two-thirds of participants use target-date funds and 59% are invested in a single TDF.

About 80% of plans offer a Roth feature, and nearly 100% of plans offer eligible participants the ability to make catch-up contributions, Vanguard said.


What do you think?

View comments

Recommended for you

Featured video


Regulators' gloves are coming off with cybersecurity. Put up your dukes with these tips

Updated guidelines and some of the first-ever rule enforcements signal that regulators are getting serious about holding firms accountable for data breaches, according to special projects editor Liz Skinner and technology reporter Ryan Neal.

Latest news & opinion

Anatomy of an annuity buyout offer

Readers are invited to comment on whether the columnist should keep or ditch her Ohio National VA contract

Factions emerge in OneFPA overhaul

Critics fear the FPA is trying to take money and power from local chapters, which officials and proponents call overblown.

RIA M&A sets another record in 2018

Last year's 181 deals were twice the number recorded five years ago, and the average asset size of the acquisitions was $1.3 billion — 31% larger than in 2017.

6 tech companies heading for IPOs this year

These Silicon Valley technology companies could make an IPO splash in 2019.

Crackdown showdown: Serious cybersecurity enforcement is coming in 2019, but are advisers ready?

When clients ask what advisers are doing to protect their data, only the firms that can give a satisfying answer will build trust with investors.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print