--- title: "Auto Enrollment: The Unintended Consequences, Part II" description: As the use of auto enrollment increases, so too should the percentage of separated participants in plans. This post examines the Food and Beverage Stores industry, finding just that result. Therefore, the author concludes, plans should consider pairing auto enrollment with portability programs, to prevent an expansion of separated participants. --- [![Retirement Clearinghouse Logo](https://blog.rch1.com/hs-fs/hubfs/raw_assets/public/Retirement_Clearinghouse_May2022/images/logo.png?width=1000&height=648&name=logo.png "Retirement Clearinghouse Logo")](https://rch1.com/) [Privacy Policy](https://securities.rch1.com/common/PrivacyStatement.pdf) [Sponsors/Service Providers](https://rch1.com/plan-sponsors) [Individuals](https://rch1.com/individuals) [Login](https://rch1.com/#) - [Home](https://rch1.com/home-page) - [Individuals](https://rch1.com/individuals) - [Individuals Home](https://rch1.com/individuals/individuals-home) - [Who is RCH?](https://rch1.com/individuals/who-is-rch) - [Why Does RCH Have My Retirement Savings?](https://rch1.com/individuals/why-does-rch-have-my-retirement-funds) - [Manage Your RCH IRA Account](https://rch1.com/individuals/manage-your-rch-ira-account) - 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[News](https://rch1.com/news) - [Press Releases](https://rch1.com/press-releases) - [Thought Leadership](https://rch1.com/thought-leadership) - [Consolidation Corner Blog](https://rch1.com/blog) - [Consolidation Corner Channel](https://rch1.com/consolidation-corner-channel) - [Events](https://rch1.com/events) - [Auto Portability](https://rch1.com/auto-portability) # Auto Enrollment: The Unintended Consequences, Part II #### [By Thomas Hawkins](https://blog.rch1.com/blog/author/thomas-hawkins) | January 4, 2016 In his December 1, 2015 article ([The unintended consequence of 401(k) auto-enrollment](https://www.benefitnews.com/opinion/the-unintended-consequence-of-401-k-auto-enrollment)), RCH CEO [Spencer Williams](https://www.rch1.com/corporate-profile/management-team/j-spencer-williamspresident-and-ceo) exposes the linkage between auto enrollment and lower average account balances.  Based on Form 5500 data, Williams’ analysis presents some excellent examples of industries where average balances are significantly lower in plans that have adopted auto enrollment compared to plans that haven’t.  Expanding on Williams’ analysis a bit, could we also expect to find a link between auto enrollment and greater numbers of separated participants?  It seems plausible: auto enrollment increases plan participation levels (a good thing), and if workforce mobility remains constant, then we’d expect to see rising levels of separated participants (a not-so-good thing). Why should that matter?  A proliferation of separated participants drives increased plan costs, leads to higher levels of cash-outs and leakage, along with more missing participants and stranded, unconsolidated accounts.  Consequently, some plans may say “no thanks” and avoid auto enrollment altogether, despite its many favorable attributes. So we looked deeper into the data, and that’s exactly what we found in one industry that we examined. **Auto Enrollment & Separated Participants:  The Food and Beverage Stores Industry** The “Food and Beverage Stores” industry ([NAIC Code = 445](http://www.bls.gov/iag/tgs/iag445.htm#workforce)) is composed of corporate names you’ll immediately recognize.  More than likely, you’re a regular shopper at one of their outlets. Methodology: In our analysis, we looked at 401(k) plans with greater than 1,000 participants, with balances.  Since the Form 5500 data contains a very detailed, six-digit “principal business code,” we rolled that up into a three-digit NAIC code for easier grouping and comparison.  We then isolated the auto enrollment feature code and grouped the plans accordingly, calculating average balances and levels of separated participants. Our Findings: - The 109 plans in the Food and Beverage Stores industry had almost 1.2 million participants. - Of these 109 plans, 26 (24%) had an auto enrollment feature, whereas 83 (76%) did not. - As Williams’ earlier analysis predicted, average balances were 10.2% lower in the auto enrollment group, compared to the group without an auto enrollment feature. - Almost 27% of the auto enrollment group’s participants were separated, vs. 14% in the non-auto enrollment group.    The incidence of separated participants in the auto enrollment group was almost twice that of the non-auto enrollment group and it appears likely that results for other “high-turnover” industries will be similar.  Stayed tuned!! **Portability:  The Counter-Balance to Auto Enrollment** Auto enrollment is a good thing because it encourages higher levels of plan participation and saving.  However, it’s now clear that auto enrollment programs can have unanticipated negative outcomes, a conclusion which is supported by Form 5500 data. Williams points the way forward by offering a solution:  deliver true plan portability as a complement to auto enrollment, allowing the feature to work better.  With portability, balances move forward as participants change jobs, lowering levels of separated participants and minimizing negative outcomes.   Thus, portability acts as a counter-balance to auto enrollment, making the plans that already have this feature healthier and more nimble while increasing the attractiveness of auto enrollment to plans that haven’t adopted it.  Continue Reading Part III Go Back to Part I [Back](https://blog.rch1.com/blog) [![Retirement Clearinghouse An RLJ Company](https://blog.rch1.com/hs-fs/hubfs/raw_assets/public/Retirement_Clearinghouse_May2022/images/footer_logo.png?width=1000&height=648&name=footer_logo.png "Retirement Clearinghouse An RLJ Company")](https://rch1.com/) 1916 Ayrsley Town Boulevard Suite 200 Charlotte, NC 28273 - [Individuals](https://rch1.com/individuals) - [Plan Sponsors](https://rch1.com/plan-sponsors) - [Auto Portability](https://rch1.com/auto-portability) - [Company](https://rch1.com/company) - [News & Information](https://rch1.com/news) - [Mission](https://rch1.com/company/mission) - [Careers](https://rch1.com/company/careers) - [Contact Us](https://rch1.com/contact-us) - [Logins](https://rch1.com/#) - [Disclosure Central](https://rch1.com/individuals/learning-center/resources-%26-downloads) - [Do Not Sell or Share](https://blog.rch1.com/blog/auto-enrollment-unintended-consequences-part2#decline-cookies) - [My Personal Information](https://blog.rch1.com/blog/auto-enrollment-unintended-consequences-part2#decline-cookies) - - - Individuals should consult their tax advisers or legal counsel for advice and information concerning their particular situation. 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