Automatic Enrollment and Its Relation to the Incidence and Distribution of DC Plan Contributions: Evidence from a National Survey of Older Workers

Abstract

Automatic enrollment has been widely embraced for raising employee participation in 401(k) plans. However, the empirical evidence on the effect of automatic enrollment on plan contributions and retirement saving overall is still imperfect. Using nationally representative data from the Health and Retirement Study (HRS), we find that although automatic enrollment is associated with a higher proportion of workers participating in DC plans, automatically enrolled workers are less likely to contribute to their DC plans and contribute on average less than their voluntarily enrolled counterparts. In contrast, employers of auto‐enrolled workers on average contribute more to their employees' accounts than do the employers of voluntarily enrolled workers. Even so, the combined effect is that the total annual contribution rates of automatically enrolled older workers are 1.6 percentage points lower than those of voluntarily enrolled workers.