Citation
Choi, J., Laibson, D., & Madrian, B. (2011). $100 bills on the sidewalk: Suboptimal investment in 401(K) plans. The Review of Economics and Statistics, 93(3), 748-763.
Highlights
- The study examined the impact of providing information about employer contribution matches and penalty-free withdrawal rules on 401(k) contribution rates. These features created an opportunity for certain employees to increase their retirement savings without decreasing take-home pay. Even though this enabled employees to make a profit at very little cost, many eligible employees did not choose to exploit this opportunity.
- Employees were randomly assigned to receive a survey embedded with explicit information on the opportunity or a control survey without the information. The authors used survey data linked to administrative data obtained from Hewitt Associates, a large benefits administration and consulting firm.
- The study found no statistically significant relationship between the treatment condition and future 401(k) contribution rates.
- The quality of the causal evidence presented in this study is high. This means we are confident that any estimated effects of the intervention would be attributable to the intervention itself, and not some other factor.
Intervention Examined
The Provision of Information on a Missed "Free Lunch"
Study Sites
- A firm with more than 30,000 employees (referred to as Company F)
Findings
- There was no statistically significant relationship between the receipt of information and future savings behavior. This finding holds in both intent-to-treat and treatment-on-treated estimates.
Considerations for Interpreting the Findings
This study analyzed the results of a well-conducted randomized controlled trial. Treatment status was defined by the survey to which an employee was randomly assigned. Although survey data were used in descriptive analysis, employees need not have returned the survey to be included in the analysis of 401(k) contribution rates.
Because fewer than 50 percent of surveys were returned to the study authors, there was some concern that employees in the treatment and control groups might not have received or read the survey. Both intent-to-treat and treatment-on-treated estimates were provided to account for the low response rate.
Most of the article covered descriptive analysis results on the sample of all employees at seven firms examined in a broader study by the authors (the supplemental citation). The randomized controlled trial reviewed here constitutes only a very small section of the article.
Causal Evidence Rating
The quality of the causal evidence presented in this study is high because it was based on a well-implemented randomized controlled trial. This means we are confident that the estimates reported accurately reflect the impacts of the information provided.
Additional Sources
Choi, J.J., Laibson, D., & Madrian, B.C. (2005). $100 bills on the sidewalk: Suboptimal investment in 401(K) plans. National Bureau of Economic Research working paper No. 11554. Cambridge, MA: NBER.