2012 Hot Topics in Retirement - Aon

Initial Contribution Rate Default Under Automatic Enrollment
Nearly two-thirds of plan sponsors (63%) acknowledge that the initial default
contribution rate under automatic enrollment is below the employer matching
threshold. The most common match level is 3%. As participant behavior and
default bias have shown, this results in many defaulted employees missing out
on some of these matching dollars.
Initial Contribution Rate Default Under Automatic Enrollment
Above full match
4%
Equal to full match
33%
Below full match
63%
(n=215)
60%
50%
40%
30%
20%
10%
0%
(n=233)
6%
10%
50%
10%
1% 2% 3% 4%
Default Savings Rate
10% 10%
5% 6%
Nearly one-quarter of employers (24%) with automatic enrollment
acknowledge that they willl make modifications to the automatic enrollment
feature’s implementation during 2012. Among companies that plan on
changing their automatic enrollment design, the most common modifications
are applying automatic enrollment to existing nonparticipants (33%),
embedding contribution escalation in the default (33%), and increasing the
initial default contribution (32%).
3%
>7%
Aon Hewitt 17