Diversity and Defined Contribution Plans: The Role of Automatic Plan Features

15 Pages Posted: 17 Nov 2011

See all articles by Stephen P. Utkus

Stephen P. Utkus

University of Pennsylvania; Center for Financial Markets and Policy, Georgetown University

Cynthia A. Pagliaro

Vanguard Group, Inc.

Date Written: September 1, 2011

Abstract

In a sample of seven large defined contribution (DC) plans, automatic enrollment reduces differences in savings and investment behavior associated with race and ethnicity. Participation rates rise across the board with automatic enrollment, but particularly for blacks and Hispanics. Automatically enrolled whites and Asians are more likely to override the default deferral rate than blacks and Hispanics, leading to a difference in deferral rates. Automatic enrollment to a default target-date fund equalizes risk-taking and reduces extreme portfolio allocations for all groups.

Keywords: 401K, savings, portfolio allocation, race, ethnicity

JEL Classification: J26

Suggested Citation

Utkus, Stephen P. and Pagliaro, Cynthia A., Diversity and Defined Contribution Plans: The Role of Automatic Plan Features (September 1, 2011). Available at SSRN: https://ssrn.com/abstract=1961100 or http://dx.doi.org/10.2139/ssrn.1961100

Stephen P. Utkus (Contact Author)

University of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Center for Financial Markets and Policy, Georgetown University ( email )

Washington, DC 20057
United States

Cynthia A. Pagliaro

Vanguard Group, Inc. ( email )

100 Vanguard Boulevard, J24
Malvern, PA 19355
United States

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