Abstract
This article examines how the variability of target-date fund (TDF) participants’ retirement income resulting from plan sponsors’ TDF choices can be reduced by a qualified automatic contribution arrangement (QACA) that reflects plan demographics. Using Monte Carlo simulations, the article finds that a QACA where a maximum employee contribution rate is based on plan demographics can not only increase participant retirement income (measured as a success rate or probability of achieving a target replacement rate), but also reduce its variability.
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