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Does Autoenrollment Affect Employer Contributions?

(Urban Institute, December 2009)

Low participation rates limit the effectiveness of 401(k) plans as a reliable source of retirement income. About one in five workers eligible to participate in their employer’s 401(k) plans do not enroll (Munnell, Golub-Sass, and Muldoon 2009). Firms can raise participation rates by automatically enrolling employees as soon as they become eligible. However, higher participation rates increase costs for employers that match employee contributions, and firms appear to reduce the rate at which they contribute to 401(k) plans when they adopt autoenrollment.