Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment(TM) / James Choi, David Laibson, Brigitte Madrian.

Format:

Book

Author/Creator:

Choi, James.

Contributor:

National Bureau of Economic Research.

Laibson, David.

Madrian, Brigitte.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11979.

NBER working paper series no. w11979

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Reducing the Complexity Costs of 401

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

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.

Notes:

Print version record

January 2006.