Comments on: When Automatic 401(k) Enrollment Is Bad http://advancedpersonalfinance.com/401k-enrollment/ Moving beyond the basics Mon, 01 Dec 2008 21:05:31 +0000 http://wordpress.org/?v=2.2.2 By: Jeremy http://advancedpersonalfinance.com/401k-enrollment/#comment-3472 Jeremy Fri, 19 Oct 2007 19:39:20 +0000 http://advancedpersonalfinance.com/401k-enrollment/#comment-3472 Actually, the PPA specifically addresses many of the downsides to automatic enrollment that you mentioned. In order for a plan to pass nondiscrimination testing the automatic enrollment has to: - Start off with a minimum of 3% contribution, and then increase by 1% automatically, without going higher than 10% - The law now encourages the default investment option to be a balanced, or lifecycle type fund. This can preempt state laws and protect providers from lawsuits, which is the primary reason old automatic enrollment plans used a fixed fund as a default. So, thanks to the PPA, in coming years new employees who are automatically enrolled will in most cases be starting at a 3% or higher contribution, automatically increase contributions by 1% each year, and be defaulted into an appropriate investment mix. This doesn't apply to non-ERISA plans, but for the majority of people with auto enrollment, this will be a big help. Of course, it always pays to be involved with your plan, and save more and invest wisely. Actually, the PPA specifically addresses many of the downsides to automatic enrollment that you mentioned. In order for a plan to pass nondiscrimination testing the automatic enrollment has to:

- Start off with a minimum of 3% contribution, and then increase by 1% automatically, without going higher than 10%

- The law now encourages the default investment option to be a balanced, or lifecycle type fund. This can preempt state laws and protect providers from lawsuits, which is the primary reason old automatic enrollment plans used a fixed fund as a default.

So, thanks to the PPA, in coming years new employees who are automatically enrolled will in most cases be starting at a 3% or higher contribution, automatically increase contributions by 1% each year, and be defaulted into an appropriate investment mix.

This doesn’t apply to non-ERISA plans, but for the majority of people with auto enrollment, this will be a big help. Of course, it always pays to be involved with your plan, and save more and invest wisely.

]]> By: Stuff Worth Reading, Because the Robot Uprising Is Near! | Punny Money http://advancedpersonalfinance.com/401k-enrollment/#comment-3451 Stuff Worth Reading, Because the Robot Uprising Is Near! | Punny Money Fri, 19 Oct 2007 15:11:48 +0000 http://advancedpersonalfinance.com/401k-enrollment/#comment-3451 [...] automatic things are usually done by robots. Advanced Personal Finance suggests you start with reconsidering automatic 401(k)s so your retirement isn’t threatened by android [...] […] automatic things are usually done by robots. Advanced Personal Finance suggests you start with reconsidering automatic 401(k)s so your retirement isn’t threatened by android […]

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