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More and more plan sponsors are trying new ways to boost participation in 401(k) plans. Of 220 large employers in a recent Hewitt study, 24% of their plan sponsors have implemented automatic enrollment—and 23% of the remainder are very likely to do so in 2006. Twenty-seven percent have also implemented automatic rebalance, and an additional 20% are very likely to do so in 2006. Meanwhile, 17% offer contribution escalation, with 13% of the remainder very likely to in 2006.

"Automated features help even the most uninterested and uncertain employee to get on the right track for saving and investing for retirement," says Lori Lucas, Director of Participant Research at Hewitt. "Such features make the 401(k) more foolproof."

In fact, Hewitt's annual study of 401(k) plan utilization shows that such efforts may be paying off. In 2005, participation rates increased for low-tenure employees. "This is encouraging, since this group has historically been one of the hardest to reach," Lucas says. "Simply put, automation can transform non-savers into savers."

Companies are also focusing on communication and education. Most of the companies said that, in 2006, they're likely to communicate the need to participate in the plan (71%), the importance of diversification (68%), and the value of saving for retirement (62%). Meanwhile, 16% say that they're very likely to add online third-party investment advisory services for employees to help with retirement saving and planning in 2006.

"The 401(k) plan is becoming an even more critical savings vehicle as traditional pension benefits are being reduced or eliminated," explains Lucas. "That's why it's important to support workers' use of the plan through savvy plan design, delivery, and communication."

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