Auto Enrollment

(a.k.a., automatic enrollment or negative elections).

Automatic enrollment is IRS- sanctioned, and a proven way to increase 401k participation company-wide.

With automatic enrollment employees are automatically enrolled in the 401k plan as soon as they meet the plan's eligibility standards. Default investment (a money market fund) and a default contribution rate (usually 3% to 5% of the person's compensation) are preset by the employer. 

All passively enrolled employees must be notified of their new 401k participant status, and be given the opportunity to change their contribution rate, investments or withdraw from the plan entirely. 

The small amount of money placed in the 401k for a new employee who cancels participation soon after automatic enrollment must stay in the plan until the person's employment is terminated.