The problem with automatic enrollment

Automatic enrollment is one of the best features of a 401(k) plan especially when it was finally codified into law in 2006. I think it helps participants save for retirement and helps increase participation, which can help with discrimination testing.

The problem with automatic enrollment is when a huge error is made, namely not using the feature that is mandated by the plan document. The problem with the error is that it’s usually not caught quickly, which might cost the employer a lot of money in corrections.

It’s not a matter of using it if you have it. When you have it, you have no choice but to use the provision.

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