In 2006, Congress passed the Pension Protection Act, which authorized employers to enroll workers in retirement plans automatically. According to the IRS, automatic enrollment is the ability of employers to contribute a certain percentage or amount from an eligible employee’s paycheck into an employee’s retirement account. Employees retain the right to opt out of the program or change the deducted amount. Auto enrollment for defined contribution plans can increase saving rates. It also serves to overcome an employee’s inertia, as many workers find enrolling to be time-consuming and overwhelming. The employer sets the initial level of deduction, helping employees to save more.
