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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
Of the nearly 12,000 defined contribution plans serviced by Fidelity Investments, those with automatic enrollment features showed a participation rate that was 22% higher than the participation rate in Fidelity's defined contribution plans that lacked the automatic enrollment feature, the financial service provider has recently reported. According to Fidelity, the difference in participation rates was greatest, by more than 40 percentage points, among young, lower-compensated employees.
Furthermore, a high percentage of employees whose employers automatically enroll them in retirement plans tend to remain in those plans. Of nearly 100,000 employees automatically enrolled in Fidelity 401(k) plans in 2005, 87% remained in their plans at least through the end of the year. Eighteen percent of automatically enrolled employees also increased their deferral rates, according to Fidelity.
Remaining in a defined contribution plan can result in an impressive increase in savings, according to Fidelity’s report. Participants in Fidelity 401(k) plans who continuously participated in their plans for the last five years had average account balances reaching $100,000. Furthermore, Fidelity 401(k) plan participants who remained active in their accounts from 2004 to 2005 saw, on the average, an account balance increase of 13%.
Under the newly-enacted Pension Protection Act of 2006 (P.L. 109-280), employers who institute automatic enrollment for workplace savings plans and automatic increases for plan contribution levels are provided a safe harbor from the applicable nondiscrimination tests. Jeffrey R. Carney, president of Fidelity, urged plan sponsors and participants to "...move urgently to take full advantage of the opportunity Congress has given us to revitalize our nation's workplace savings plans and improve the retirement readiness of millions of Americans."
Automatic increase programs (AIPs) are also reported by Fidelity to have a positive impact on the balances of participants' accounts. In 2004, for example, the average AIP participant started with a lower deferral rate than did the average non-AIP participant. After only one or two annual increases, however, Fidelity's analysis reveals that the AIP participants' average deferral rates surpassed those of the non-AIP participants by 0.5%.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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