Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment

David Laibson, James Choi and Brigitte Madrian

Scholarly Articles from Harvard University Department of Economics

Abstract: The complexity of the retirement savings decision may overwhelm employees, encouraging procrastination and reducing 401(k) enrollment rates. We study a low-cost manipulation designed to simplify the 401(k) enrollment process. Employees are given the option to make a Quick Enrollment [TM] election to enroll in their 401(k) plan at a pre-selected contribution rate and asset allocation. By decoupling the participation decision from the savings rate and asset allocation decisions, the Quick Enrollment [TM] mechanism simplifies the savings plan decision process. We find that at one company, Quick Enrollment[TM] tripled 401(k)participation rates among new employees three months after hire. When Quick Enrollment [TM] was offered to previously hired non-participating employees at two firms, participation increased by 10 to 20 percentage points among those employees affected.

Date: 2009
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Citations: View citations in EconPapers (11)

Published in Developments in the Economics of Aging

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http://dash.harvard.edu/bitstream/handle/1/4686772 ... mplexityCost401K.pdf (application/pdf)

Related works:
Chapter: Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment (2009)
Working Paper: Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment(TM) (2006)
Working Paper: Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment(TM) (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:4686772

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