Plan sponsors are eager to improve participants’ retirement outcomes by making sure they’re properly allocated in a sensible investment, such as a target-date fund. Reenrollment is a powerful way to steer employees into effective investment options. It’s a process that places employees’ retirement savings into a plan’s qualified default investment alternative (QDIA) on a certain date unless they make an active decision to choose another investment.
However, some plan sponsors have balked at the idea of reenrollment, saying “there’s no need to do it” and “it’s too much work.” Others are worried about perceived fiduciary risk—that some employees might react negatively, or take legal action because investment decisions were made for them against their will. We think plan sponsors should take another look at reenrollment. Implementing this process shows a commitment to acting in plan participants’ best interests, helping them improve their chances of financial security in retirement.