A study of South Dakota’s Supplemental Retirement Plan (SRP) has found that instituting automatic enrollment programs results in a staggering leap in participation rates. The study followed several dozen government units in the first eight months of the program. Ninety-one percent of new, eligible employees are participating in the SRP in units that adopted automatic enrollment, versus one percent of new hires in units without automatic enrollment. The study was commissioned by Retirement Made Simpler (RMS) and conducted by the Center for State and Local Government Excellence.

Under automatic enrollment, employees are enrolled in the plan automatically, at a set amount in a pre-set investment choice.  Employees have the ability to change the amount they save, invest in a different fund, and opt out at any time.  

“South Dakota is an example for other states,” said Joshua Franzel, study co–author and vice president of research for the Center for State and Local Government Excellence. "Our study offers lessons learned from the new SRP automatic enrollment implementation that will inform the efforts of other governments considering similar policies. Automatic enrollment is a useful feature that can be used by public employers to continue to provide retirement security to public servants across the United States.”

The South Dakota legislature unanimously authorized the automatic enrollment program because of its concern about the low savings rates of certain demographic groups, uncertainty surrounding the future of Social Security benefits, and the decline of personal savings rates nationwide.

The combination of pension benefits and Social Security replaces approximately 75 percent of the final pre-retirement earnings of a South Dakota retired state employee with 20 to 25 years of service, the average length of service for retiring state workers according to the South Dakota Retirement System. To encourage public employees to save even more for retirement, South Dakota created the SRP, which allows participants to save on their own, while postponing the payment of income tax on both contributions and earnings until retirement. In 2008, legislation was passed authorizing the South Dakota Retirement System to begin automatic enrollment in the SRP.