“Our nation is suffering from a savings deficit,” said Emanuel. “Retirement security for future generations of Americans involves not only strengthening Social Security and preserving its rock-solid guarantee, but also creating innovative ways to increase saving in this country. This legislation will help companies like RR Donnelley help their employees invest in their futures.”

Automatic enrollment in employee-based 401(k) plans is the single most effective way to get employees to start investing in retirement accounts. Yet, as of 2003, only 8% of all companies who offered 401(k) plans had adopted automatic enrollment as an option. And only 1% of those plans included companies with fewer than fifty employees.

“This bill has the potential to revolutionize the way Americans save for retirement and will open new doors for the millions of Americans who have not considered their options for retirement beyond Social Security,” said Emanuel.

Automatic enrollment has been particularly successful at increasing participation among those who most need the additional savings. Companies that offer automatic enrollment to their employees discovered a striking rise in participation among those earning less than $20,000 a year.  Merely changing the position of the “on-off switch” or put even more simply, by changing the “default” from non-enrollment to enrollment, employee participation in 401(k) savings increased from 13% to 80%.

This legislation will promote and facilitate wider adoption of automatic enrollment, helping more Americans begin to build retirement nest eggs through new 401(k) plan contributions by:

• Clarifying and codifying Internal Revenues Service (IRS) rulings to permit 401(k) auto enrollment.
  
• Confirming that automatic enrollment is not restricted by state laws barring employers from deducting amounts from employees’ paychecks without an employee signature.
  
• Giving employers protection to ease their concerns about liability for investment losses if the company’s automatic investments are made in a prudent manner.

RR Donnelley instituted automatic enrollment for all of its employees in January of 2005 and since then, employee participation in the 401(k) plan has increased from 68% to 92%. RR Donnelley employees are automatically enrolled at a 3% contribution rate, meaning 3% of their income is automatically contributed on a pre-tax basis into a 401(k) account. RR Donnelley provides a small matching contributions and incentive matching contributions based on performance.

“Saving for the future is in the best interest of all of our employees NOW,” said Mark A. Angelson, CEO of RR Donnelley. “We applaud Congressman Emanuel for taking the lead on such an important issue. Automatic enrollment in 401k accounts, as proposed by Congressman Emanuel, would promote savings and enable employees to maximize security in their retirement. This is far too important an issue to be put on the back burner.”

Emanuel’s legislation would give RR Donnelley new tools to improve its program by increasing the employee’s automatic contribution over time or when the employee gets a raise. For example, an employee who might give 3% the first year, could give 4% the second year, and 5% the third. Additionally, Emanuel’s legislation will allow companies like RR Donnelley invest in higher-yielding “lifecycle” or other balanced funds. Finally, Emanuel’s legislation makes it easier on the employees and companies should an employee choose to opt out after being in the plan for only a short time.

The 401 (k) Automatic Enrollment Act of 2005 is the third piece of legislation Emanuel has introduced this year to encourage Americans to save. Last month, he introduced the Retirement Savings for Working Americans Act of 2005, which made the Saver’s Credit refundable and permanent and the Direct Deposit Savings Act of 2005, which makes retirement savings easier by allowing taxpayers to deposit some or all of their Federal income tax refund directly into personal savings or Individual Retirement Accounts.