Automatic Enrollment, Employer Match Rates, and Employee Compensation in 401(k) Plans

Research Report

Automatic Enrollment, Employer Match Rates, and Employee Compensation in 401(k) Plans

September 29, 2015

Abstract

Automatic enrollment has been shown to increase employee participation in 401(k) plans. But by boosting plan participation, autoenrollment can increase employer costs of sponsoring 401(k) plans as previously unenrolled workers receive matching contributions. This article examines differences in worker compensation between establishments with and without the provision. The results show a negative correlation between the generosity of the employer match structure and the autoenrollment provision. However, neither total compensation costs nor 401(k) costs differ between firms with and without autoenrollment, and 401(k) costs do not appear to crowd out other forms of compensation.

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