MINNEAPOLIS, Sept. 27 /PRNewswire-FirstCall/-- A new national survey
from Wells Fargo & Company's (NYSE: WFC) employee benefits consulting
group, BPS&M, reports that two-thirds (66 percent) of employers already use
automatic enrollment in their 401(k) plans or intend to implement it within
the next 18 months. The survey also shows a dramatic shift over the last
year in the investments into which employees are automatically enrolled.
More than half (56 percent) now use a diversified investment.
The 2007 Strategic Initiatives in Retirement Plans Survey, which
includes responses from over 350 employers nationwide, reports a nearly 70
percent increase over the last year in the percentage of plans that
automatically enroll new employees in the organization's 401(k) or other
defined contribution plan (44 percent in 2007 versus 26 percent in 2006).
One-fifth (21 percent) of these plans also automatically increase the
employee's contribution rate over time.
Many companies appear to be following proposed guidance from the
Department of Labor that encourages employers to select investments with a
blend of stocks and bonds for the default investment into which employees
are automatically enrolled. In the last year, the percentage of plans using
automatic enrollment with a conservative default fund (stable value or
money market) fell from 61 percent to 39 percent. These conservative
investments are typically replaced by target date or target risk funds,
which are diversified investment options managed to a particular retirement
date or risk tolerance. Thirty-nine percent of plans used these targeted
funds in 2007, up from 14 percent in 2006. Including plans with standard
enrollment, two out of five (42 percent) employers plan to change their
default investments in the next 18 months, most of these (71 percent) will
shift from conservative funds to target date funds (66 percent) or target
risk funds (20 percent).
"The retirement landscape is changing rapidly and America's 401(k)
plans are going through a dramatic transformation that will result in
significantly greater retirement savings for millions of workers," said
Laurie Nordquist, head of Wells Fargo Institutional Trust Services.
"Automatic enrollment, especially when combined with a diversified default
investment and a contribution rate that increases over time, finally will
make employee inertia a good thing. We're very encouraged by the findings
of this survey."
Like last year's survey respondents, employers continue to cite active
employee participation (28 percent) and investment knowledge (22 percent)
as their greatest challenges for 401(k) plans. Retirement planning
workshops and meetings were identified as the most effective communication
technique by 41 percent of respondents.
"While in-person meetings are viewed as the most effective way to
communicate with employees, only one in five (22 percent) make the meetings
mandatory," said Kathie Tange-duPre, director of surveys and publications
for Wells Fargo's benefits consulting group, BPS&M, which conducted and
analyzed the survey.
About the Survey
The survey was conducted from early April through May 2007. Survey
results can be obtained by contacting BPS&M at 615-665-5335 or
BPSMsurvey@wellsfargo.com.
About Wells Fargo
Wells Fargo Institutional Trust Services (ITS) is a national leader in
providing investment solutions, total retirement management, trust and
custody solutions, and benefits consulting for institutional clients. ITS
offers service to more than 5,000 clients and 1.4 million retirement plan
participants across the country.
Wells Fargo & Company is a diversified financial services company with
$540 billion in assets, providing banking, insurance, investments, mortgage
and consumer finance through more than 6,000 stores and the Internet
(wellsfargo.com) across North America and elsewhere internationally. Wells
Fargo Bank, N.A. is the only bank in the U.S., and one of only two banks
worldwide, to have the highest credit rating from both Moody's Investors
Service, "Aaa," and Standard & Poor's Ratings Services, "AAA."
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