New Law Allows Automatic 401(k) Enrollment

As reported in Darmon Darlin, On Making Enrollment in a 401(k) Automatic, NY Times, Aug. 19, 2006:

The Pension Protection Act, signed this week by President Bush, gives companies [the ability] to stick their employees into a 401(k) and, in many circumstances, offer them some financial advice. But it isn’t clear that the law will set off a wave of more savings unless employees take a bit of initiative.

The law allows companies to enroll employees in a 401(k) plan automatically unless they choose to opt out. Auto enrollment uses the human tendency toward procrastination, inertia or avoidance to the employee’s advantage.

“They have to make the choice that they don’t want to save,” said Jeffrey R. Carney, president of Fidelity Retirement Services, the nation’s largest provider of 401(k) plans.