The Impact of Employer Matching on Savings Plan Participation under Automatic Enrollment

John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian

in Research Findings in the Economics of Aging

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226903064
Published online February 2013 | e-ISBN: 9780226903088 | DOI:
The Impact of Employer Matching on Savings Plan Participation under Automatic Enrollment

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This chapter discusses the continuing series of studies on the structural features of 401(k) plans. Companies have used a variety of approaches to encourage participation in employer sponsored savings plans. The vast majority of large firms now offer the most common approach, the provision of an employer matching contribution. Even with a match, however, savings plan participation rates are often surprisingly low, and their effect on participation is found to be relatively small. Automatic enrollment is an alternative mechanism for increasing savings plan participation. All of the companies in which automatic enrollment has been studied to date have also offered an employer matching contribution. The study disentangles the effects of matching and automatic enrollment in two ways. The first is to study a large firm with automatic enrollment that replaced its employer match with a noncontingent employer contribution to the plan, thereby eliminating the incentive that was provided by the match. The second approach is to pool the participation data from nine firms, all with automatic enrollment, but with varying matching provisions.

Keywords: automatic enrollment; 401(k) plans; employer; company

Chapter.  11195 words.  Illustrated.

Subjects: Economics

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