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UNITED STATES DEPARTMENT OF LABOR

Can simple informational nudges increase participation in a 401(k) plan? (Clark et al., 2014)

Review Guidelines

Causal Evidence Guidelines

Absence of conflict of interest. 

Citation

Clark, R. L., Maki, J. A., & Morrill, M. S. (2014). Can simple informational nudges increase participation in a 401(k) plan? Southern Economic Journal, 80(3), 677-701. https://doi.org/10.4284/0038-4038-2012.199

Highlights

  • The study’s objective was to determine the impact of an education flyer on employees’ decisions to participate in their company's 401(k) plan. 
  • The study was a randomized controlled trial where eligible employees were assigned to the treatment group to receive an informational flyer or to the control group. Using administrative data provided by the company, the authors conducted statistical models to compare outcomes between the groups.  
  • The study found that for all employees, the flyer did not significantly impact enrollment in the company’s 401(k) program. However, the flyer significantly increased 401(k) participation for newly match-eligible employees and employees aged 18-24 and 35-44, but significantly decreased participation for employees 45 years of age or older.  
  • This study receives a high evidence rating. This means we are confident that the estimated effects are attributable to the information flyer, and not to other factors.

Features of the Study

The study was a randomized controlled trial conducted at one of the 10 largest financial institutions in the U.S. Eligible employees were randomly assigned to one of three groups: the treatment group receiving a flyer with a peer participation statement, the treatment group receiving a basic flyer, or the control group who did not receive a flyer. The peer participation statement provided the percentage of the company’s employees that were already contributing to the 401(k) program. Both versions of the flyer began with, “Are you leaving money on the table?” and stressed how a little money, invested over time, could lead to large savings. The flyer also contained information on the company’s matching policy and how to enroll. The flyer’s content was based on information the company provided to employees during their orientation, and in their benefits package. Most employees (73 percent) received the flyer via email and the rest received the flyer through interoffice mail. 

The study included 3,684 employees hired between January 1, 2008 and December 31, 2010 who were not contributing to their company's 401(k) plan as of February 2011. The sample was predominantly female (73 percent) and between 18 to 44 years old (80 percent). The authors combined the treatment groups for analysis, with 2,439 employees in the (combined) treatment group and 1,245 employees in the control group. The authors used statistical models to compare the outcomes of treatment and control group members. 

Findings

Knowledge and skills for financial decision making  

  • The study did not find a significant impact of the flyer on enrollment in the company’s 401(k) program for the whole sample of employees.  
  • When explored by age group, the study found that the flyer significantly increased 401(k) participation for 18-24 year olds (by 4.8 percentage points) and 35-44 year olds (by 3.1 percentage points) compared to the control group. However, participation of employees 45 years of age or older significantly decreased by 4.8 percentage points. 
  • For employees who were newly match-eligible, the study found that the flyer significantly increased 401(k) participation (by 9.2 percentage points) compared to the control group.  
  • The study found that the flyer significantly increased 401(k) participation for newly match-eligible employees of all age groups relative to the control group: ages 18-24 (15.3 percentage points), ages 25-34 (5.8 percentage points), ages 35-44 (8.5 percentage points), and 45 and older (9.6 percentage points). 

Considerations for Interpreting the Findings

The authors note that participation in the 401(k) plan is discussed by managers during annual reviews. Therefore, employees who had been with the company longer may have had more exposure to information about the plan. Also, employees who were eligible for the match (21 years of age or older and completed 1,000 hours within 12 months of his or her hire date) may have a higher participation rate due to this reminder from their managers during annual reviews. 

Causal Evidence Rating

The quality of causal evidence presented in this report is high because it was based on a well-implemented randomized controlled trial. This means we are confident that the estimated effects are attributable to the information flyer, and not to other factors.  

Additional Sources

Clark, R. L., Maki, J. A., & Morrill, M. S. (2013). Can simple informational nudges increase employee participation in a 401(k) plan? (NBER Working Paper No. 19591). https://www.nber.org/system/files/working_papers/w19591/w19591.pdf Clark, R., Morrill, M.S., & Maki, J. (2011) Encouraging new hires to save for retirement. Financial Literacy Center Working Paper No. WR-892-SSA. https://dx.doi.org/10.2139/ssrn.1969649

Reviewed by CLEAR

November 2023

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