Auto Enrollment Plan
No, it's not a plan to create a car that you can roll up like a sleeping bag. Instead, it has to do with retirement savings.
The concept is relatively simple, once its broken down. "Auto" is short for "automatic." "Enrollment" refers to signing up for (you guessed it) a retirement plan (which, by the way, provides the "plan" part). So an "auto enrollment plan" is a retirement program where an employer automatically deducts money from an employee's paycheck and puts it into a retirement account, such as an IRA or a 401(k).
The employee can choose to opt out of the program, but if they don't say anything, they will automatically get enrolled.
The general motivation for these programs: people get lazy about retirement. If you leave it up to employees to actively sign up for a plan - go into HR, get the paperwork, fill it out, then bring it back by whatever deadline - they probably will end up binge watching Game of Thrones instead.
So instead of making them do work to get into the program, the employer makes them do work to get out of it. A vast number of people will stay in the program from there, meaning their retirement accounts could be growing even while they watch Ned Stark get his head lopped off.
Related or Semi-related Video
Finance: What is a Pension?31 Views
finance a la shmoop. what is a pension? well it rhymes with tension, and likely
for good reason. if you're a teachers pension or a fireman's pension or [person wearing dark glasses writes something down]
another state employees pension that's backed up by a state that's going
bankrupt. Hi, California, Hi Illinois. well we're looking at you. all right people
well a pension is another term for a retirement fund. but what's special about
a pension is that the employer essentially forces you to put away money
for your retirement and then they invested for you.
how nice. or at least be sure you invest it well on a salary of 75 grand a state [gambling table shown]
employed ditch-digger might get a contribution of say 10 grand a year into
her pension, and that's each year 10 grand of forced savings for as long as
she you know digs ditches for the state. and in some states where the unions are
strong in the governing financial knowledge is weak the government
guarantees a minimum financial return on the pension investment made on behalf of
the employees. that is in California for example the state guarantees a 10% per
year return on their invested pension savings. if the invested return like [equation]
investing it in Wall Street and stocks and bonds and private equity funds and
all that stuff well if that invested return is less than that number less
than that 10%, then the state rights to the pinch and a check to cover the
incremental difference. yeah it's a huge Delta and it's well pretty much why you
a Californian Illinois you're going bankrupt remember. Jesus Saves
but Moses invests. [ Moses, holding stone tablets glares and demands interest]
Up Next
What is a 401(k)? A 401(k) is a retirement plan that is offered by many employers (government entities, however, use a 403(b) plan). These plans us...
A Keogh Plan is an IRA for self-employed people. Oh. Did we just spoil this video? You should still watch it...we put a lot of work into it...