SPHR Question #264: Real Exam Question with Answer & Explanation

The correct answer is C. implement automatic plan enrollment.. The most effective way to increase participation in a 401(k) plan is to implement automatic plan enrollment (C). SPHR-level benefits strategy recognizes that employee participation is heavily influenced by behavioral factors, particularly inertia and decision avoidance. Automatic

Question

An organization finds that a large percentage of its employees are not enrolled in its 401(k) plan. The best way to increase participation is to:

Options

Areduce fees imposed by the plan.
Breduce the time needed to be vested.
Cimplement automatic plan enrollment.
Dincrease the number of funds available.

Explanation

The most effective way to increase participation in a 401(k) plan is to implement automatic plan enrollment (C). SPHR-level benefits strategy recognizes that employee participation is heavily influenced by behavioral factors, particularly inertia and decision avoidance. Automatic enrollment shifts the default choice from "opt in" to "opt out," significantly increasing participation rates without requiring active employee decision-making. Numerous workforce studies and benefits best practices demonstrate that automatic enrollment leads to substantial and sustained increases in plan participation across demographic groups. While reducing fees (A) and shortening vesting periods (B) may improve plan attractiveness, they do not address the primary barrier to participation--failure to take action. Increasing fund options (D) can actually decrease participation by overwhelming employees with choices. SPHR exam content emphasizes that effective benefits design leverages behavioral economics to drive desired outcomes. Automatic enrollment is considered a best practice for retirement readiness and aligns with fiduciary responsibility to support employees' long-term financial well-

Community Discussion

No community discussion yet for this question.

Full SPHR Practice