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August 22, 2005
Rule Could Boost Automatic 401(K) Enrollment

The Department of Labor is considering a proposal that would offer guidance for employers who automatically enroll employees in 401(k) plans, USA Today reports.

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A proposed rule on automatic 401(k) enrollment could come by the end of the year, according to the newspaper.

The Department of Labor says automatic enrollment encourages workers to save for retirement.

"We want to remove barriers for people to save for retirement, and automatic enrollment really addresses one of the problems that people face: They may be overwhelmed with the responsibility of saving for retirement," says Ann Combs, assistant secretary at the Department of Labor's Employee Benefits Security Administration.

Nineteen percent of large companies automatically enroll employees in their 401(k) plans, up from 14 percent in 2003, according to a recent survey by Hewitt Associates.

Some employers avoid automatic enrollment because of the possibility that employees may sue if investments lose money, the newspaper notes. The Department of Labor tells the newspaper that the proposed rule would aim to offer some protection to employers if the choice of investment options is "reasonable."

Read about 401(k) plans at Compensation.BLR.com.

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