Certified Plan Sponsor Professional (CPSP) Practice Exam

What challenge is often faced by employees automatically enrolled at a low deferral rate?

1. They will always revert to higher contribution rates

2. They may not revisit their election and stay at the minimum level

3. They cannot change their deferral percentages

4. They will receive constant encouragement to increase their contributions

The correct answer is: They may not revisit their election and stay at the minimum level

Employees who are automatically enrolled in a retirement plan at a low deferral rate often face the challenge of not revisiting their contribution elections and remaining at that minimum deferral level. Automatic enrollment is designed to encourage participation in retirement savings programs, but it usually sets a default contribution percentage that might not be sufficient to meet long-term financial goals. Many employees may not take the initiative to review or adjust their contributions after being enrolled. This complacency can lead them to stay at a low contribution rate indefinitely, missing out on the opportunity to increase their savings that could better support their financial future. Therefore, the tendency to "set it and forget it" when it comes to retirement contributions can become a significant hurdle, as the low initial rates may be inadequate for a comfortable retirement. The other options suggest misconceptions about the automatic enrollment process; for instance, employees are indeed able to change their deferral percentages, which counters the idea of being unable to do so. While encouragement to increase contributions may occur, it’s not guaranteed and does not address the challenge of employees not actively engaging with their savings decisions.