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For Better or for Worse Default Effects and 401(k) Savings Behavior (Choi et al. 2004)

Review Guidelines


Choi, J.J., Laibson, D., Madrian, B.C., & Metrick, A. (2004). For better or for worse default effects and 401(k) savings behavior. National Bureau of Economic Research, 81-126


  • The study’s key objective was to examine the impact of automatic 401(k) plan enrollment on enrollment rates and contribution levels at three firms in the United States.
  • The analysis was based on data on enrollment in and contributions to retirement plans from the companies themselves. The study used an interrupted time series (ITS) design, analyzing changes in outcomes before and after the implementation of automatic enrollment.
  • The study found that automatic enrollment increased participation rates. In addition, automatic enrollment led to a larger percentage of participants investing at the plan’s default contribution rate.
  • The quality of causal evidence presented in this report is low. This means we are not confident that the estimated effects are attributable to the companies’ automatic enrollment policies. Other factors are likely to have contributed.

Intervention Examined

Automatic Enrollment

Study Sites

  • Company A was a large office equipment company that had about 32,000 employees.
  • Company B was a large health services firm that had about 30,000 employees.
  • Company C was a food products company that had about 18,000 employees.


  • The study found that across all three companies, automatic enrollment increased 401(k) participation.
  • After implementation of automatic enrollment, the percentage of participants investing at the default rate increased from 21 to 57 percent in Company A, 7 to 72 percent in Company B, and 12 to 46 percent in Company C. 
  • Automatic enrollment increased wealth accumulation for those with lower wealth by reducing the percentage of employees who did not participate in the 401(k) plans.

Considerations for Interpreting the Findings

Although all three studies implemented similar interventions, we analyze them as distinct ITS designs because each study employed a different initial 401(k) contribution rate, asset allocation, and eligibility constraint. There were four pre-post sets of comparisons of interest in this study: the implementation of automatic enrollment for employees at Company A and Company B, and the first and second wave of automatic enrollment implementation at Company C. These later two interventions were separately considered based on when they subjected employees to automatic enrollment.

Each intervention reviewed here was implemented only one or two times and included an insufficient number of observations before and after the policy went into effect to satisfy Clearinghouse for Labor Evaluation and Research (CLEAR) criteria. Furthermore, employees hired before and after automatic enrollment was implemented faced very different market conditions, potentially influencing the decision to participate in a 401(k) or the contribution rate. Together, these concerns make it difficult to conclude that the observed changes in enrollment rates were driven by the interventions themselves, instead of other concurrent changes.

Causal Evidence Rating

The quality of causal evidence presented in this report is low. This means we are not confident that the estimated effects are attributable to automatic enrollment. Other factors are likely to have contributed. To provide more convincing evidence of the interventions’ effects that satisfies CLEAR criteria, the authors should consider evaluating similar programs at other firms and using more pre- and post-intervention observations in their analyses. If other implementations demonstrated similar effects and more data were used to show such effects, we could be more confident that the intervention drove changes in outcomes, and not some other concurrent change.

Reviewed by CLEAR

December 2014