Advice On Employees And 403(B)s

I got an interesting letter recently from a reader who works in HR and friends, she’d like our help!

I’m a longtime fan of the Billfold and really appreciate your ability to convey complex information in an accessible way. I’m also an HR Manager at a small non-profit and often look to your site to get ideas about how you and the commenters (sp?) view workplace policies and finances. Part of my job has been to write our handbook and update our practices as this is the first time they’ve had an HR person. Fortunately, my organization is all about transparency, fair policies and non-discrimination around wages so it’s mostly fun and challenging.

We have a very generous 403(b) plan, but about half our staff chooses not to take advantage of it. I am working on improving education about compound interest and the importance of not leaving money on the table (the employer match), but I’m not sure what else to do. My boss has recently suggested that we move to an opt-out program, where we automatically enroll everyone when they start working here and then they have to opt-out within a certain time frame if they don’t want to be part of the plan.

When she said this, it made me cringe and think of big brother, Facebook privacy settings and yahoo toolbars being installed when you thought you were just getting adobe flash.
I think it sounds awful for us to decide how our employees should be saving and I don’t want to have to explain to people who don’t realize it’s happening until it’s too late and are upset. I don’t know if I’m overreacting or not, and I was wondering if you could cover opting-out as part of your series about 401(k)s? I would be curious to know how common it is and how employees feel about it.

True, that moment when we realized our iTunes had been updated without our consent to include a U2 album was a strange and disquieting one this year. But Apple didn’t even give us an Opt-Out option. If my employer assumed that I was cool with my getting a 403(b) — which, for the uninitiated, is a retirement plan available largely to public school employees, ministers, and other do-gooders — and informed me, so that I could turn down the option if I wasn’t into it, that would be fine with me.

Science has found that “presumed consent” helps people make wiser, more generous choices. We mean to do the right thing, after all, it’s just that we’re kind of busy and kind of lazy and easily distractible by whatever’s on HBO Go. So that’s my take: try the Opt-Out option rather than the Opt-In one and see if it helps. What say you, general populace? Too Big Brother-y, or simply a helpful nudge?

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