When companies first introduced 401(k) retirement plans in the early 1980s, employees needed to be briefed on their benefits. These days, most people already know the upside of this type of saving vehicle. The main challenge is persuading them to sign up when they have so many demands on their incomes.
That’s why some companies are switching to automatic enrollment plans, where the employee must take action to get out of the program. Olivia Mitchell, head of the Pension Research Council at the Wharton School of the University of Pennsylvania, says the opt-out version of the traditional 401(k) retirement plan is nothing short of a revolution in favor of retirees. “They have spread like wildfire,” she says, especially after the Pension Preservation Act of 2006 clarified the rules. She adds that she only sees them growing in the future.