What is the default consequence of not opting out of automatic enrollment in a 401(k) plan?

When a 401(k) plan implements automatic enrollment, the default consequence of not opting out is that participants will be automatically contributing a certain percentage of their salary to their retirement savings. This practice encourages saving for retirement by making it easier for employees to participate in the plan without having to take any additional steps.

Automatic enrollment typically sets a predefined contribution rate, often starting at a modest percentage of the employee's pay, which is then deducted automatically from their paycheck. This helps to increase participation rates in retirement plans, enabling employees to start saving for their retirement without having to make an explicit decision to do so.

The other options do not align with the typical mechanics of automatic enrollment in a 401(k) plan. For example, offering a cash bonus or doubling contributions as a default would not be standard practice and could lead to complications or financial strain for employees. Losing employment benefits is also unrelated to the mechanism of automatic enrollment and would not be a standard consequence for failing to opt out.