The Case Against 401(k) Automatic Enrollment

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What if your company does not offer automatic enrollment? What laws cover that to convince your employer that this is necessary?

Teresa of NC 10:02AM May 17, 2012

Any time someone offers to automatically enroll you in something, supposedly "for your own good", you can be sure there's something in it for them. Yes, some companies will do a percentage match, but the thing no one talks about is that match is not really yours until you are fully vested. In my experience, getting to "fully vested" takes working 5 years at the company. LOL!How often does that happen anymore? I no longer believe in 401K's. I've had two, both companies laid me off so I had to cash 'em out in order to pay the bills. To add insult to injury, I had to take a penalty, pay out taxes, and of course, I didn't get but a tiny portion of the match. Somebody made a ton of money and it sure wasn't me.

Sherri of OK 6:26PM September 17, 2011

Not all 401k Plans are very good. A past company I worked for the company did not use auto enrollment, but they matched the contribution dollar for dollar. So of course I went "out of my way" to enroll myself in it. I then left that company to go into another.
My present company's 401k did not match it so I never contributed. Then they started an auto enrollment that should of been more publically announced as I only noticed it when I saw it being taking out of my paycheck.
The biggest benefit of 401ks is when companies match it, but I am willing to bet you all these companies that are doing this a large majority of them do not match anything. A 401k without company contribution is not the best way to save your money.

PeopleAbuseIt of NC 9:07AM January 07, 2011

I think Sharon got it wrong. Can't be communist because they don't believe in Capitalism. It's a Corporat Fascist way to manipulate people into doing things they can do voluntarily, ie:, (Go to Vanguard, T Rowe Price, etc.) and open your own IRA. It's a paternalistic way to make people manage their money better. And of course it's a way for Wall Street Bankers to stuff their brokerage accounts and make billions. Anyone can invest and should do it themselves. If they want a 401-K they should elect into it and not have to elect out of it. Besides, if you manage your own money you'll be a more educated investor instead of having someone do it for you.

toni of CA 9:55PM March 18, 2010

Just another scam. This auto-enrollment was not designed to make you save money. The baby boomers will be forced to withdraw more and more money from the retirement accounts at a rate that would exceed what younger generations contribute. This is a sneaky way to bust the rate of investments in Mutual funds (basically stocks) to prevent the market from going down!
Wake up people!

Zorros of NV 1:16AM January 30, 2010

Cool post you got here. It would be great to read a bit more concerning this topic.

MarkRight of AL 1:17AM October 22, 2009

sorry it is not. i don't want in a 401k plan and I think this is communist to automatically enroll an employee in it if they do not want to be.

sharon kossman of OH 7:35PM August 07, 2009

You missed quoting the 1936 Alf Landon speech when he argued against the passage of Social Security. His reasons were as simple as yours; government paternalism. That is an understandable position. Back then, social security was viewed the same way, an unwanted inteference in peoples lives. Not acceptable then and not acceptable today.
However, Social Security passed and almost 75 years later is still in businss. Despite the government coming up with the idea, legislating the idea, and it being run by the government, it still works. Nobody complains when it is taken out of your paycheck. It is a guarenteed check on retirement, a defined benefit for the rest of your life.
The reason social security is in trouble is that no one thought people would be living so much longer. Is that a bad reason? No.
What we need is an additional tool, a defined contribution plan to make people self sufficient and reduce the stress on public retiree benefits.
In order to have everyone do it, is to have autoenrollment. The difference between Social Security and DC auto-enrollment is that can also be used to address specific and defined problems in your life prior to retirement especially when it comes to times of undue hardship such as death, medical emergency, home or job loss.
Auto enrollment will be the key in reducing sole reliance on social security, medicare and unemployment. That savings can reduce reliance on medicare and could make the difference in an older person's dinner.
There is also a choice - they can always choose not to participate in the first 90 days of implementation or reduce the amount to zero.
The best thing that can happen to this country is to have an opt out plan.

Dean Carothers - National Save for Retirement Committee- NAGDCA Delegate of CA 10:23PM August 03, 2009

Automatic enreollment is just another predatory practice to subsidize the equity markets. The 2006 Pension Reform also allowed automatic enrollments to be invested in riskier assets, like hybrids instead of money market funds.
Ultimately, the ICI and members want to make 401ks mandatory to provide a guaranteed stream of revenue to the markets. The dream is that they can jack up the markets again, with our retirements, in the tech bubble tradition.

OSR of MD 7:18AM July 19, 2009

Emily, here is what you are wrong about in this article: everything.
The only way to invest money for the future is to INVEST MONEY. You have very lofty utopian dreams of magical seminars that will open people's eyes and inspire them to educate themselves about retirement planning.
But those seminars never come to pass.
What is important about them having money is saving it now. No amount of seminars is going to help them invest their money. Investing their money is going to help them.
As far as visiting payday lenders and low-income employees, the only thing that is going to help them with their future money is investing some present money.
The most successful revenue stream on earth is the US income tax. Why is it so successful? Because it is taken out of everyone's paycheck before they have a chance to visit a payday lender or turn that cash to trash.
When people are automatically enrolled, THEN they will get interested in educating themselves about money, choices and retirement, because they will have skin in the game.
Nothing else works. History says so. We have all the educational seminars about money that could possibly exist, right now. How is that working for low-income people? Not so good. How is it working for payday lenders? Pretty well.
Automatic enrollment is the future, and more importantly, a better future for everyone.

Anthony Migyanka of TX 6:27PM July 03, 2009