One of the frustrations employers sometimes experience in the implementation of 401(k) plans is low participation rates. Lack of participation on the part of those who choose not to enroll in a company's 401(k) plan can have adverse consequences for two groups:

• Employees who choose not to enroll, as they forego the opportunity to build retirement savings, and possibly lose company matching dollars,
• Highly-compensated employees who are enrolled in the plan, as the less than lower-paid employees contribute to a 401(k) plan, the less highly-compensated employees are allowed to contribute.

It always has shocked me that some people choose not to participate in a 401(k) plan, particularly when employer matching funds are given up by this decision. But it happens, and it happens quite a bit, particularly in the lower-paid ranks of employees. According to an article by Jim Barlow in the September 20, 1998 edition of the Houston Chronicle, one CPA firm's survey found that 90% of highly-compensated employees participate in 401(k) plans when they are available, compared to just 64% of lower-paid employees.

As seems to be the case with so many regulations, there are hurdles to overcome to implement such a plan. If you are considering the implementation of automatic enrollment, you should consult a qualified plan advisor.