The Pension Protection Act may have been passed back in 2006, but the regulation is being revisited now that enough time has passed to allow a serious look at how the provisions have affected the health of retirement savings. New analysis by the Employee Benefit Research Institute finds that the "automatic" 401(k) features enacted by the PPA have a very significant positive impact in generating additional retirement savings for many workers, especially for low-income workers.

Features such as auto-enrollment into 401(k) plans and auto-escalation of savings contributions have escalated 401(k) savings. EBRI reports that the increase in the value of 401(k) accumulations of final earnings for those currently ages 25 to 29 would be approximately 2.4 to 2.6 times the final salary by switching from voluntary enrollment to automatic enrollment. 

These aggregate results strongly favor automatic enrollment, but the higher paid are not likely to benefit as much from a shift from voluntary enrollment to auto-enrollment.

"To the extent that 401(k) sponsors decide to switch from voluntary enrollment systems to the new automatic enrollment plan designs in PPA, many workers will have increased retirement savings, especially those in the lowest-income quartile," said Jack VanDerhei, EBRI research director and co-author of the analysis. "For example, a 25-year-old worker making $25,000 a year would be likely to have a median increase in 401(k) accumulations of between $92,000 and $166,000 in today's dollars by age 65 as a result of these changes."

While auto-enrollment is benefiting many workers, auto-enrollment alone will not be enough for certain workers to be able to meet savings targets that would provide for a 75% or 90% chance at sufficient retirement savings. Additional resources will still be needed for many workers. Some experts say automatic features are helpful in overcoming the inertia of initial enrollment, but plans must be revisited and tailored to be most beneficial to the individual.

EBRI's analysis was conducted using its Retirement Security Projection Model.The full report is published in the June EBRI Issue Brief and is called "The Impact of PPA on Retirement Savings for 401(k) Participants." It is available online at http://www.ebri.org.