401(k)'s a boon to low-income workers

A study released today by the nonpartisan Employee Benefit Research Institute shows that the Pension Protection Act of 2006 will result in a significant increase in 401(k) accumulations — particularly for low-income workers. The study predicts that the automatic escalation will increase 401(k) accumulations by 11% to 28% for participants in the lowest income group and 5% to 12% for participants in the highest income group. The legislation allows employers to automatically enroll workers in the company’s 401(k) plan and to automatically increase a worker’s 401(k) contribution to coincide with a raise or a work anniversary — though the employee can decline both enrollment and the increase. These findings “suggest that the introduction of automatic escalation will result in a significant increase of 401(k) accumulations — especially for low-income workers — compared with estimates previously determined for automatic enrollment,” according to the analysis.