Transcripts

Forced 401(k)

PAUL KANGAS: If you want someone to do something, make it automatic. That's what the Department of Labor did with the new 401(k) plan rules that it issued today. By making the sign-up procedures for 401(k) plans automatic, the government says 5 million more Americans will take part in company retirement plans. Darren Gersh reports.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Think about all the decisions a new employee has to make. Should I enroll in the company 401(k) plan? How much should I put in? Where should I invest my money? Faced with so many questions, one out of three workers simply decide to pass. Now, Assistant Secretary of Labor Bradford Campbell says his department is issuing new rules to simplify the decision-making by helping employers automatically sign up employees.

BRADFORD CAMPBELL, ASSISTANT SECRETARY OF LABOR: It makes it easier for the employees. Employees are able to look at an option that has been selected and by essentially agreeing with it by not objecting to it, employees are able to be invested in options that are appropriate for retirement savings.

GERSH: Congress decided to encourage auto-enrollment when it passed the pension protection act last year. The law shelters companies from being sued if a worker later loses money on an investment. But to get that protection, the Labor Department says employers must put an automatically- enrolled employee's cash into either a life cycle fund, a balanced fund or a professionally managed account. The insurance industry had lobbied hard to include in that list so-called stable-value funds, which carry lower returns but offer protection against losses. In the end, the Labor Department disagreed, deciding for a mix of stocks and bonds. Paul Stevens represents mutual fund companies in Washington. He says there's no question which investments are better for retirement accounts.

PAUL STEVENS, PRESIDENT, INVESTMENT COMPANY INSTITUTE: The real issue is how do you provide American workers the opportunity to grow their retirement balances over time and what labor said is implementing what Congress intended you get a mix of different assets in the account and that is what these regulations provide.

GERSH: AARP's David Certner supports the new rules and says the next step will be to get workers who are auto-enrolled in a 401(k) to get serious about preparing for retirement.

DAVID CERTNER, LEGISLATIVE COUNSEL, AARP: We would suggest to people to not only look at their different investment options in the plan, but to also consider contributing more money than they might be having under automatic enrollment.

GERSH: The new rules take effect just before the end of the year. The Department of Labor estimates in another 25 years, auto-enrollment will increase retirement savings in the country by $130 billion. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.