Department of Labor To Issue Automatic Enrollment Regulations by End of Year
The Department of Labor plans to issue proposed regulations by the end of the year to encourage employers to use automatic enrollment for their 401(k) plans.
One of the reasons many companies have been reluctant to add this feature to their 401(k) plans is a concern about selecting a "default fund". That is, employees would sue if they lost money in the employer-chosen fund. The Labor Department will address this concern in the proposed regulations by providing protection from such law suits if the employer-chosen investment is "reasonable". Ann Combs, Assistant Secretary of the Department's Employee Benefit Security Administration was quoted in USA Today as saying that the proposed regulations would allow employers to "offer balanced investment options with a little more risk but with returns that allow people to save enough for retirement."
Balance investment options include, of course, equity exposure. Click here to see what Vanguard says about it as featured in a prior posting.