Will Automatic Enrollment Reduce Employer Contributions to 401(K) Plans?

Posted: 3 Mar 2010

See all articles by Mauricio Soto

Mauricio Soto

International Monetary Fund (IMF)

Barbara A. Butrica

The Urban Institute

Date Written: December 1, 2009

Abstract

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 auto-enrollment increases the number of workers participating in private pensions, our findings suggest it might also reduce the level of pension contributions.

Suggested Citation

Soto, Mauricio and Butrica, Barbara A., Will Automatic Enrollment Reduce Employer Contributions to 401(K) Plans? (December 1, 2009). Available at SSRN: https://ssrn.com/abstract=1553270

Mauricio Soto (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Barbara A. Butrica

The Urban Institute ( email )

2100 M Street, N.W.
Washington, DC 20037
United States

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