Los Angeles partner Fred Reish was quoted in a CNBC article titled “Don’t Fear a 401(k) Re-enrollment Notice, It’s a Good Thing.” More companies are re-enrolling employees in their 401(k) plans, so that retirement savings are moved into the default investment option, unless the participant designates another choice.
A recent Callan study found that 88.2 percent of 401(k) plans used target-date funds as their default investment options. Federal law offers some legal protection in the form of a “safe harbor” when plan sponsors use target-date funds as default options.
“The primary motivation is to improve participant investing… [b]ut the safe harbor helps, because it takes away the feeling of risk," Fred noted.
Fred also stated that companies shouldn’t complete re-enrollment more often than every two to three years, to allow for individual circumstances to change.