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  • 2010
  • Chapter
  • Research Findings in the Economics of Aging

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

By: John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian
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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 noncontingent employer contribution. This firm's experience suggests that non-contingent employer contributions only weakly crowd out employee participation.

Keywords

Motivation And Incentives; Consumer Behavior; Personal Finance; Investment Funds; Microeconomics; Compensation And Benefits

Citation

Beshears, John, James J. Choi, David Laibson, and Brigitte C. Madrian. "The Impact of Employer Matching on Savings Plan Participation under Automatic Enrollment." In Research Findings in the Economics of Aging, edited by David A. Wise, 311–327. Chicago: University of Chicago Press, 2010.
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About The Author

John Beshears

Negotiation, Organizations & Markets
→More Publications

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More from the Authors
  • Social Salary Setting at Spiber By: Ashley Whillans and John Beshears
  • Nudging: Progress to Date and Future Directions By: John Beshears and Harry Kosowsky
  • Do Physician Incentives Increase Patient Medication Adherence? By: Edward Kong, John Beshears, David Laibson, Brigitte Madrian, Kevin Volpp, George Loewenstein, Jonathan Kolstad and James J. Choi
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