Working Paper: NBER ID: w13352
Authors: John Beshears; James J. Choi; David Laibson; Brigitte C. Madrian
Abstract: Existing research has documented the large impact that automatic enrollment has on savings plan participation. All the companies examined in these studies, however, have combined automatic enrollment with an employer match. This raises a question about how effective automatic enrollment would be without a direct financial inducement not to opt out of participation. This paper's results suggest that the match has only a modest impact on opt-out rates. We estimate that moving from a typical matching structure - a match of 50% up to 6% of pay contributed - to no match would reduce participation under automatic enrollment at six months after plan eligibility by 5 to 11 percentage points. Our analysis includes a firm that switched from a match to a non-contingent employer contribution. This firm's experience suggests that non-contingent employer contributions only weakly crowd out employee participation.
Keywords: automatic enrollment; savings plan participation; employer matching contributions
JEL Codes: D14; D91; G23; H31; J32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| one percentage point decrease in the maximum potential match (C78) | decrease in plan participation (J26) |
| eliminating the employer match at Company A (J32) | decrease in participation rates (J26) |