Automatic 401k Enrollment Coming?

[jeffrey]

If The Department of Labor has its way, more companies will begin automatic enrollment in their 401k programs beginning next year. The Department of Labor expects to propose a regulation sometime this year that it hopes will encourage companies to automatically enroll more of their workers in 401k plans. If passed, the regulation will affect millions of workers and hundreds of thousands of retirement plans.

Currently it's the employees who usually decide whether or not to invest in the company's 401k plan. When they make this decision, they choose how much money to invest and where the money will be invested from choices given by the company. Since it is up to the employee to take the initiative, many simply don't participate in the 401k plans available.

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Some companies have been reluctant to automatically enroll employees in 401k plans due to the risk that the 401k plan may lose money. The companies fear lawsuits from employees that are automatically enrolled if this happens. According to the Labor Department, the proposed regulation will give employers some protection from lawsuits when automatically enrolling them if the investment options chosen are "reasonable."

[pennywise]

mandatory 401K

It is not the employers or governments decision to mandate 401K deposits. With the stock market history this is very inappropriate. Have you ever noticed how they do things like this, then pass laws to prevent the lawsuits from their poor decisions. I think when people (and this is who the government is) should be held liable for all decisions they make, especially when they involve others. We will definitely, purposely, opt out of the 401K. Again, it is not up to someone else how to run my life, money, child raising, etc. Let them mind their house and I will mind mine. I strongly resent this after we lost all earnings, employer matching, and some priniciple in Mr. Bush's wonderful leadership of our country and Mr. Greenspans over-indulgence in dictatorial financial leadership. We sacrificed and saved the max in our 401K to have it milked by fees from mutual funds and stolen by more savy investors on wall street who invited us to join the bandwagon with their idiotic comments of dollar cost averaging. I can take care of myself, thank you. This is a budget shell game to forgive the government (just people folks) who have made very bad decisions, false promises - and now are being exposed. This is going to be one heck of a system of fincancial sellers offering kick-backs to employers and your employer may not be the best shepherd to protect his flock but nothing better than the pied piper leading the rats to drowning. Thank you, leave my income and finances alone. I do not believe in charity or taxation. I am tired of people stealing from me and calling it other names. Stealing is stealing: the intent to take without giving back. Stealing is a violation of the 10 commandments. May all these law making people get their just rewards on judgement day. I would not want to answer the questions they will be asked and then led to the special door to Hades.

[pennywise]

mandatory 401K

Sorry, forgot. Make the mandatory payments fee free! Wall street is salivating on this one folks, and my day trading account is ready for you. I am waiting, because I WILL RECOVER what was taken from me. So go ahead and join the bandwagon. I have read for over 12 years this subject, I watched the irrational exuberation, and I am waiting. The stock market is a legal pyramid scheme. Someone wins, someone loses. As you deposit, let the prices rise, I will sell and take the money. Thank you. That's the game folks, plain and simple. And I am not the only one waiting!!!

[agold138]

401k

I think it would be a great idea -- considering that I have worked for the same company/person for the last 10 years and there is no 401k. I would have been happy to have one even without any matches. At least my gross income would have been lowered for tax purposes.

I've only managed to put money into IRA's the past three years. So I will be working till I'm 70. I'm 59 now.

If companies were obligated to have 401k's, then I wouldn't be in such a mess. And the great 401k I had from where I worked before I moved [had terrific matches to your dollar] and got this job is gone. I went through a lay-off and couldn't find a job for 8 months. I wish someone would have told me not to every use your 401k money. If I hadn't of touched that 401k I would have been in decent shape today even without a 401k now. Live and learn!! The hard way.

[pennywise]

Re: Automatic 401k Enrollment Coming?

My thought when I read your response: why do you have to have your employer do this for you? Save on your own and call it a 401 if you wish. Did you read my response. A lot of people lost a lot of money because of these 401K's. Not to mention it is government controlled money. If you have an emergency you pay 10% penalty. Furthermore, the government tracks it - your money, savings, etc is none of their business. Listen to me again: we lost all earnings, all employer matching, and some principle in this legal pyramid scheme. Please learn what the stock market is - a legal, very huge gambling casino with many people who know this game very well. How many people like me do you think are sitting there with their day trading accounts waiting for the rebound. Read, read, read. The stock market, housing, bonds are not investing they are gambling. An asset is something that produces income for you. Savings is a place to store money. Gambling is the stock market, bonds, and buying houses. The pied piper plays and you follow. REad REAd READ and learn please. I know many 70 year olds who are still working due to the stock market losses. So again, why does your employer or the government have to get you to save? Can't you do it on your own?

[BAGAGT1]

Sounds to me like...

I'm completely against making 401k participation mandatory. Not that I'm opposed to 401k's, quite the opposite, I think everyone who has one available should contribute to one (especially to get the full company match, if one is available). However, one need not look any further than the previous four posts and see that it is an invitation to disaster. Too many people do not understanding stocks, bonds, mutual funds, etf's, and other investment vehicles, and that can only lead to lost retirement funds and class action lawsuits.

A better solution would be employee/employer funded pension plans like traditional pensions, but both employee and employer contribute equal amounts. Oh, I think we have this, it's call Social Security and the government has screwed that up, so now we are to let them dictate to us how and what to invest our money in?

In the end, we are only responsible for our own retirement, so I say use every available vehicle possible. I am a big fan of funding both a 401k and a Roth IRA to at least 10%-15% of gross pay. Nevertheless, once you are invested in anything that is not government insured, then you have to be accoutable to yourself, and make it a priority to understand what it is you are invested in, how much you are gaining/losing, and when you plan to sell your investment should your coveted investment start to lose ground.

[Bluezy]

Re: Automatic 401k Enrollment Coming?

Well done, Penny!

[StressLess]

We have $2700 we wouldn't have otherwise...

because of automatic enrollment.

My husband was given a form to fill out some time ago, if he DIDN'T want to participate in a 401K. If he didn't turn in the form, they were going to take 3% of his pay out automatically. Well, we kept forgetting about it and procrastinating, and it started getting taken out.

Now the balance is $2700, which I'm sure we'd never have gotten put away for retirement on our own. It would be even higher if we'd bothered to choose something beyond the money market fund, where it went automatically! (Just within the past month, I finally signed DH up for online access to his account. We now have it set up to go in a balanced fund and a guaranteed insurance thing that pays better interest than the MM.)

I think there's something to be said for taking advantage of people's laziness--for their own good.

(Edit - I was assuming the regulation would back companies for doing what DH's did, and still give the employee the ability to opt out. Many of the other commenters seem to think everyone would be forced to participate. Does anyone know the particulars?)

[jeffrey]

Re: We have $2700 we wouldn't have otherwise...

I was assuming the regulation would back companies for doing what DH's did, and still give the employee the ability to opt out. Many of the other commenters seem to think everyone would be forced to participate. Does anyone know the particulars?

It's still in proposal stage at this point, but my understaning is that what you said would be correct. It won't be mandatory that every company must do it, but there will be incentives to encourage companies to do it - and if they do, the default will be enrollment. Anyone can opt out if the choose.

[agold138]

Re: Automatic 401k Enrollment Coming?

Not to make excuses, about not saving on my own -- was a single parent with one child who sporadically got child support and then the ex just quit working. I worked -- probably around 37 to 38 years of my life. My son has gotten his degree & masters. But being in survival mode does not allow the luxury of extra money to be put into a 401k, savings a/c or stock investments. It was a basic put bread on the table way of life. The only 401k I ever had was from a bank I worked for that matched funds -- which I didn't lose any during the late 1980's because I was so conservative in my choices. It is great that you are so knowledgeable and have been able to do what you have done -- I'm just happy to have a savings account the last two years. It is obvious that I am not "tuned in to the stock market" and I haven't READ READ READ -- I just think it might have been a better situation for me. Like another bill that had to be paid. What I would have liked more is my company at least having a 401k to participate in.

[CRFSaver]

Re: Automatic 401k Enrollment Coming?

They actually call it negative enrollment. Unless you opt out they autmatically take a set figure (say enough to get the match) and map it to particular funds. Most companies map it to a money market fund so they cant get in trouble for putting you in a risky investment...