Limiting new defaults and plan design innovations to new hires creates two separate and unequal participant populations: those who benefit from your best ideas, and those left behind. As a result, you’re best thinking might not be reaching everyone in the plan even though you provide a thoughtfully designed defined contribution plan, with a carefully selected default option designed to encourage savings, create diversification and help build retirement security. 

Reenrollment can get your participant population aligned with your current best practices. Here are a few common scenarios that have spurred plans to consider reenrollment:

  • A new target date fund is the default option for new hires only, raising fiduciary concerns that legacy populations may not be in age-appropriate investments or sufficiently diversified.
  • Despite offering a diversified menu, participant data analytics reveal concentrations of inappropriate risk, insufficient savings rates or potentially inadequate retirement outcomes.
  • Following a merger or acquisition, executive leadership wants to combine all employees into a single plan or create a common experience across the workforce.
  • Participant communications about the new qualified default investment alternative (QDIA) have not driven legacy populations to switch to the new default.
It’s more common than you think

Most plan sponsors are aware of the benefits of reenrollment. In fact, BlackRock’s 2019 DC Pulse Survey found that 86% of employers believe that automatically reallocating their participants’ assets to more appropriate age-based investments would help improve retirement planning. Almost 1 in 5 plan sponsors have conducted a QDIA reenrollment, according to the Defined Contribution Institutional Investment Association biennial plan sponsor survey in 2017. 

Help participants help themselves

Very few participants have the expertise, time and specialized insight needed to manage their own asset allocation. Even those who feel confident enough to make their own investment decisions are unlikely to review or adjust their investments over time, as shown by the more than 40% of participants surveyed who said they have never changed their investments. That means even participants who “got it right” when they first selected their investments may no longer have an age-appropriate risk exposure.

Reenrollment can help address these issues, and, may even take advantage of participant inertia by automating the investment management they may need to reach their retirement goals. By reenrolling employees who aren’t currently invested in the QDIA, you can provide the same target date fund benefits to all your participants, no matter when they joined the plan – ensuring that everyone may benefit from your current best thinking.

Wish you had a guide to re-enrollment? Good news. There’s one right here.