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.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
13352.
Length: Date of creation: Aug 2007 Date of revision: Handle: RePEc:nbr:nberwo:13352
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Find related papers by JEL classification: D14 - Microeconomics - - Household Behavior - - - Personal Finance D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
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