Automatic Enrollment, Employer Match Rates and Employee Compensation in 401(k) Plans

Barbara Butrica and Nadia Karamcheva

No 8807, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This study uses restricted-access employer-level microdata from the National Compensation Survey to examine the relationship between automatic enrollment and employee compensation. By boosting plan participation, automatic enrollment has the potential to increase employer defined contribution plan costs as previously unenrolled workers receive matching contributions. Using cross-sectional variation in employer compensation costs and the automatic enrollment provision within firms sponsoring DC plans, we examine differences in compensation between those with and without the provision. A significant negative correlation exists between the generosity of the employer match structure and the automatic enrollment provision. However, we find no evidence that total compensation costs or DC costs differ between firms with and without automatic enrollment, and no evidence that DC costs crowd out other forms of compensation.

Keywords: automatic enrollment; defined contribution plan costs; employer match generosity; employee wage and non-wage compensation; firm behavior (search for similar items in EconPapers)
JEL-codes: J26 J31 J32 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2015-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: Monthly Labor Review, May 2015

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