Citation
Laibson, D., Choi, J., & Madrian, B. (2009). Reducing the complexity costs of 401(k) participation through Quick Enrollment. Developments in the Economics of Aging, 57-82.
Highlights
- The study’s objective was to examine the effect of a simplified 401(k) enrollment procedure called Quick Enrollment on plan participation through three trials at two anonymous companies (two trials at company A and one at company B). Quick Enrollment offered employees the choice of joining a 401(k) plan at a fixed contribution rate, investing in prespecified funds.
- Hewitt Associates, a consultancy and benefits management company, provided data on 401(k) plan participation, compensation, and other demographic characteristics for employees at two anonymous firms. For company A, year-end cross-sectional data from 2002 and 2003 were available for all employees in addition to a September 1, 2004, snapshot. For company B, only year-end data for 2002 and 2003 were available.
- Plan enrollment rates for new employees rose after each Quick Enrollment implementation, with an enrollment increase of 14 percentage points at company A and 2 percentage points at company B.
- The quality of causal evidence provided in this study is low. This means that we are not confident that the estimated effects are attributable to Quick Enrollment; other factors are likely to have contributed.
Intervention Examined
Quick Enrollment
Study Sites
- Company A: A large health services company that had about 40,000 employees
- Company B: A manufacturing company that had about 20,000 employees
Findings
- New hires at company A offered the Quick Enrollment option were 14 percentage points more likely to enroll in the company’s 401(k) plan within one month of hire than those offered the traditional opt-in enrollment method, a statistically significant difference.
- Among previously nonparticipating employees at company A, 20 percent joined the 401(k) plan after the Quick Enrollment period.
- Overall 401(k) enrollments at company B increased 2 percentage points from February 1 to June 1, 2003, from a pre-intervention rate of 74 percent.
Considerations for Interpreting the Findings
Although all three studies implemented similar interventions, we analyzed them as distinct interrupted time series designs because each study employed a different initial 401(k) contribution rate and asset allocation. Each intervention reviewed here was implemented only once. This makes it difficult to conclude that the observed changes in enrollment rates were driven by the interventions themselves, instead of other concurrent changes.
The timing of the nonparticipant study at company A also introduced concern that many employees chose to enroll in the 401(k) plan not because of Quick Enrollment but because the online benefits registration meeting brought retirement savings to their attention. Similar issues pertain to the analysis of company B, in which those who received the intervention were compared with nonparticipating employees who were eligible to receive a Quick Enrollment mailing but did not receive the information. Because this control group is unlikely to be a representative sample of all company B nonparticipants, the comparison combines the effect of Quick Enrollment with that of possible intrinsic differences between those who received mailings and those who did not.
Causal Evidence Rating
The quality of causal evidence provided in this study is low. This means we are not confident that the estimated effects are attributable to Quick Enrollment; other factors are likely to have contributed. To provide more convincing evidence of the interventions’ effects that satisfies Clearinghouse for Labor Evaluation and Research (CLEAR) criteria, the authors should consider implementing the program at other firms and in the absence of other changes in firms’ policies and procedures, controlling in their analysis for key demographic characteristics of the affected workers. If such analyses demonstrated similar effects, we could be more confident that changes in outcomes were driven by the intervention, and not some other concurrent change.