When it comes to retirement saving, taking the first step is often the hardest part. Automatic enrollment and escalation are plan features designed to make that step easier, and to keep employees on track long after they join.
Automatic Enrollment Helps Gets Employees Started
With automatic enrollment, new employees are enrolled in the plan at a preset contribution rate, often 5-6%. While they can always opt out or adjust their rate, this default ensures they begin saving right away. Participation rates are typically higher in plans that use this feature, which also helps employers meet compliance requirements.
Automatic Escalation Builds Momentum
Enrollment is just the beginning. Automatic escalation raises contribution rates gradually, by 1-2% each year, until they reach a set cap, usually 10-15%. This steady increase helps employees grow their savings over time without requiring them to take additional action.
Benefits for Employers and Employees
Together, these features do more than simplify the process of saving. They support higher participation, help with nondiscrimination testing and demonstrate an employer’s commitment to long-term financial success. For employees, they encourage better saving habits and provide confidence that their plan is working in their favor.
Bottom line: Automatic enrollment and escalation are straightforward tools that can strengthen a retirement plan for everyone involved.
