When a 401(k) participant goes to the trouble of selecting investment choices, they don’t expect them to shift over to a default option, but that’s exactly what happens frequently when a sponsors switches recordkeepers or provider, The Wall Street Journal reports. Because the offering lineup is not the same as the old plan, the only logical thing to do is to place the money in a safe default.
However, as automatic enrollment becomes more common among 401(k) plans, re-enrollment, whereby all employeers, not just new hires, are periodically set to a default, might become more common, too. As that becomes more of the norm, administrators could even take the liberty of readjusting a portfolio deemed too conservative.
Advisers thus urge 401(k) participants to keep a watchful eye on their asset allocation.