Why Every Employee Should Be Auto-Enrolled
Back in April, I blogged about why auto-enrollment is always a good idea - but what I truly believe is that each and every employee in the country receiving a paycheck should be auto-enrolled in a retirement plan. Yes, every last one! New employees, existing employees, employees without retirement plans - everybody!
While it may sound like a radical statement, consider the following:
- Almost everyone has a retirement plan already into which they are automatically enrolled. It’s the defined benefit plan, known as Social Security. And even though individuals cannot opt out, I have not heard very many complaints!
- You CAN opt out of automatic enrollment. If an individual doesn’t like being auto-enrolled, they can opt out. Problem solved.
- It is unlikely that individuals will financially worse off after being automatically enrolled. Yes, some automatic programs may have their drawbacks and there is an argument that certain individuals should prioritize other types of savings plans (such as an emergency fund or HSA) over retirement plans. But if an employee is consciously prioritizing some other type of savings over retirement plan savings, they can opt out, as mentioned above.
- That employee revolt over auto-enrollment? Not happening! Countless plan sponsors have successfully implemented auto-enrollment with nary a peep out of their employees. And many employees have been auto-enrolled in their medical, dental, and other benefits for years; only there, it is called “negative enrollment.”
So, whether it is through a qualified retirement plan, a state-sponsored auto-IRA, or a MEP (and hopefully via open MEPs in the not-to-distant future), I am hoping that the trend toward auto-enrolling everyone will continue to gain momentum!
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.
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