Automatic enrollment is on a tear. After the federal government gave its blessing through the Pension Protection Act (PPA), a steadily mounting number of employers are signing up new employees automatically into 401(k)s to help them make sure they put enough away for retirement. But this also raises the fiduciary stakes for plan sponsors since most default options–the investments that participants are placed in when they fail to select one–have tended to offer only the lowest of yields, albeit accompanied by the smallest of risks.

The PPA took that into account too, by providing a working definition of qualified default investment alternatives, or QDIAs. And in November
the Department of Labor identified three types of investment funds that qualify under the PPA as safe harbors: target-date funds, balanced funds and professionally managed accounts.

So now it is up to plan sponsors to make sure their plans also make the grade, and not surprisingly employers and vendors are pushing forward to find or create options that will make employees happy that their companies signed them up."What's encouraging is that companies realize that simply automatically enrolling employees into the 401(k) plan will not get workers where they need to be in terms of retirement savings," says Pamela Hess, director of retirement research at Hewitt Associates. "They are shifting their priorities from basic enrollment to quality enrollment…by picking more appropriate default rates."