Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment
AbstractThe complexity of the retirement savings decision may overwhelm employees, encouraging procrastination and reducing 401(k) enrollment rates. We study a low-cost manipulation designed to simplify the 401(k) enrollment process. Employees are given the option to make a Quick Enrollment [TM] election to enroll in their 401(k) plan at a pre-selected contribution rate and asset allocation. By decoupling the participation decision from the savings rate and asset allocation decisions, the Quick Enrollment [TM] mechanism simplifies the savings plan decision process. We find that at one company, Quick Enrollment[TM] tripled 401(k)participation rates among new employees three months after hire. When Quick Enrollment [TM] was offered to previously hired non-participating employees at two firms, participation increased by 10 to 20 percentage points among those employees affected.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 4686772.
Date of creation: 2009
Date of revision:
Publication status: Published in Developments in the Economics of Aging
Other versions of this item:
- James J. Choi & David Laibson & Brigitte C. Madrian, 2009. "Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment," NBER Chapters, in: Developments in the Economics of Aging, pages 57-82 National Bureau of Economic Research, Inc.
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