From a recent study by Hewitt, described in this press release here:
Employer efforts to automate, simplify and better communicate the 401(k) plan are making positive differences in improving certain employee investment behaviors and raising participation rates among hard-to-reach demographics,” said Lori Lucas, director of retirement research at Hewitt Associates. . .Not surprisingly, Hewitt’s study found that companies that automatically enrolled employees saw higher participation rates for younger, lower-tenured and lower-salaried workers than those that didn’t. Participation rates among employees with less than one year tenure were 30 percentage points higher than those across the entire Hewitt Universe, 21 percentage points higher for employees making under $20,000 in salary, and 22 percentage points higher for employees age 20-29.
And regarding participants’ tendency to over-invest in company stock:
While the use of lifestyle and lifecycle funds increased, Hewitt’s study showed employees have decreased their investments in company stock. Although it continued to remain the single largest holding for employees in 401(k) plans that offer it, the average investment in company stock decreased from 26.5 percent in 2004 to 21.9 percent in 2005. In addition, the number of employees holding half or more of their 401(k) balances in company stock decreased from 27 percent in 2004 to 20 percent.To a large extent, this reflects the fact that employers are proactively reducing the role of company stock in the 401(k) plan,” added Lucas. “For example, very few employers now restrict diversification out of company stock. This, coupled with the growing availability of third-party investment advice and guidance, and diversification tools such as lifestyle and lifecycle funds, is helping employees make better investment choices in their 401(k) plans.”
The annual study examined the saving and investing habits of more than 2.6 million employees eligible for 401(k) plans.