Brief Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?
Mauricio Soto, Barbara Butrica
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Many employers match employee contributions to 401(k) plans. However, the employer cost of continuing this practice may increase rapidly as trends towards automatic enrollment boost employee participation. This paper examines the relationship between employer matching behavior and automatic enrollment. Using a sample of large 401(k) plans, we find that match rates are about 7 percentage points lower among firms with automatic enrollment than among those without automatic enrollment, even controlling for firm characteristics. So while autoenrollment increases the number of workers participating in private pensions, our findings suggest it might also reduce the level of pension contributions.
Research Areas Economic mobility and inequality Aging and retirement
Tags Economic well-being Pensions Income and wealth distribution Retirement policy
Policy Centers Income and Benefits Policy Center