Laziness can actually help people save for retirement. At least that’s what some companies are betting on.

Knowing many workers never get around to joining their 401(k) plans, companies increasingly are signing people up automatically. Employees can choose to opt out – but that would involve filling out some paperwork, which many also never get around to.

The result: “We have that inertia work in favor of employees rather than against them,” said Kathleen Roin, director of global retirement benefits at IBM, which started automatically enrolling new hires in January.

In fact, most people don’t opt out of the program, so 401(k) participation soars to 92 percent from 66 percent once a company institutes automatic enrollment, according to a July study by the Investment Company Institute and Employee Benefit Research Institute, both in Washington, D.C.

About 19 percent of large companies have auto enrollment, up from 14 percent two years ago, according to a 2005 study by Hewitt Associates, a human resources outsourcing and consulting firm. Overall, about 9 percent of employers automatically sign up workers.

Companies are deciding they must take this step to prepare employees for retirement. While many people know they should be saving more, they often don’t make it a priority, said Lori Lucas, director of participant research at Hewitt Associates.

Roughly 30 percent of eligible workers overall don’t sign up for their 401(k) plans. Among those in their 20s or others with fewer than two years on the job or who make less than $20,000, fewer than half join the plan.

Auto enrollment a start

Auto enrollment, however, raises the participation rate to between 85 percent and 95 percent across all demographics, proving an effective way to get younger and lower-income workers in the plan, Lucas said.

But even with auto enrollment, employees can’t sit back and assume their retirement needs will be met. That’s because the amount funneled into the 401(k) may not be enough: Many companies’ so-called “default” contribution is only 2 percent or 3 percent of salary. And those funds are routinely invested very conservatively – yielding too little to build an adequate nest egg.

In some cases, auto enrollment can end up decreasing one’s savings for retirement. That’s because if they made the choice themselves, some people would contribute more money into more aggressive funds, which generally yields more at retirement, experts said.

This problem was one reason why companies had slowed the implementation of auto enrollment. But in the past year or two, employers have begun turning to it once again – in part because as companies eliminate their traditional pension plans, 401(k) accounts are becoming an increasingly important part of employees’ retirement savings.

“Companies are now more interested in making sure that their employees have enough money at the end of the day in their 401(k) accounts, not just an opportunity to save for retirement,” said David Wray, president of the Profit Sharing/401(k) Council of America, an industry association.

Congress is trying to encourage even more employers to implement auto enrollment. Several bills are pending that would offer tax breaks and incentives to do so. Also, the proposed legislation seeks to ease companies’ concerns about their liability if they pick the investments.

Employers are very cautious when it comes to taking funds out of workers’ paychecks because they fear being sued if the default investments lose money, experts said. That’s why many companies only withdraw 2 percent or 3 percent of salary and put it into relatively safe money market or stable value funds.

Changing the cycle

But if employees never opt to boost their contribution rate and transfer that money into more aggressive funds, they’ll likely wind up short-changed, said Andrew Metrick, associate professor of finance at The Wharton School at the University of Pennsylvania.

As a result, some firms are instead putting money into balanced or life-cycle funds, which usually get higher returns because they contain both stocks and bonds.

At IBM, the default contribution is 3 percent and goes into a stable value fund. Aware this may be a problem if employees don’t tailor their plans to their needs, Roin plans to closely monitor what auto-enrolled employees do with their funds in coming years. One tactic she is considering is sending a letter at workers’ one-year anniversaries encouraging them to change out of the defaults if they haven’t already done so.

Changing the default contribution rate and investment choice to more aggressive options can translate into thousands of dollars more at retirement, the Investment Company Institute study found. Retirees can wind up with up to $15,000 more per $100,000 of salary if they invest 6 percent in diversified funds versus 3 percent in conservative ones.