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Automatic Enrollment and Increases

Saving for your retirement is easier this year.

Your employer can now automatically funnel at least 3% of your salary into a retirement savings plan. Each year, 1% will be added until you reach a minimum 6% deferral rate by the fourth year.

Companies offering auto-enrollment also must match the contributions with either:

• 100% on the first 1% of the employee’s pay, plus 50% on the next 5%, for a total match of 3.5%
• Or a non-elective contribution of 3%

And they have to fully vest workers in the plan within two years. That means that the company match belongs to you if you leave the company after the vesting period.

Law makes saving automatic

The Pension Protection Act of 2006, which went into effect in 2008, loosened restrictions on companies to automatically enroll employees in defined-contributions plans − better known as 401(k)s, 403(b)s, 457s and 403(b)s.

The legislation is expected to prompt millions more Americans to start preparing for retirement by making participation automatic.

You can opt out

Although companies are encouraged to offer the auto-enrollment feature, they’re not required to.

Nor do you have to participate. You have 90 days to opt out and any money that was deferred is returned.

But why would you?

Auto-enrollment is an idea whose time has come. It’s easy, convenient and ideal for today’s mobile workforce.

You're investing for something really important − your future − with money that is tax-deferred until you withdraw it.

You’ll always have access to it and you control it, subject to distribution penalties and charges. Withdrawals are taxed as ordinary income and if taken prior to age 59½, they may be subject to a 10% penalty.

You're in control − now what?

But just because you're automatically enrolled in a retirement savings plan, don’t leave your retirement account on auto-pilot.

Make sure the contribution rates and investment options that your company sets as the default for automatic contributions are designed to help grow your retirement account.

Take the next step

Contact your investment professional for information about the role an employer-sponsored retirement plan can play in your future and for information about selecting investment options.

Neither Nationwide nor any of its representatives give legal or tax advice. You should contact your legal or tax advisor for such guidance.

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