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June 21, 2005
More Employers Try Automating 401(k) Plans

A growing number of employers are automating features of their 401(k) plans to encourage participation, according to a survey of 450 large companies by Hewitt Associates.

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Nineteen percent of the companies surveyed automatically enrolled employees in their 401(k) plans, up from 14 percent in 2003. More than a quarter (26 percent) provided automatic rebalancing, up from 11 percent.

The number of companies that offered or planned to offer contribution escalation features -- which enable workers to automatically increase their 401(k) contributions over time--increased to almost 20 percent, up from just 3 percent in 2003.

Nearly two-thirds (64 percent) of the companies said the 401(k) plan was their primary retirement savings vehicle in 2005, up from 55 percent in 2003, and more employers are encouraging participation by offering tools that put their 401(k) plans on autopilot, according to Hewitt.

Financial education is another way employers are trying to increase participation. Nine out of ten (91 percent) companies provided investment education to employees in 2005, and more than one in three (37 percent) offered outside investment advisory services, compared with 28 percent in 2003.

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