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Simplification and Saving (Beshears et al. 2010)

Citation

Beshears, J., Choi, J., Laibson, D., & Madrian, B. (2010). Simplification and saving. Cambridge, MA: National Bureau of Economic Research.

Highlights

  • The study’s key objective was to examine the impact of Quick Enrollment, an option enabling individuals to more quickly and easily enroll in a retirement savings plan, on plan enrollment rates and contribution levels at two firms in the United States (companies A and B). The study also examined the impact of Easy Escalation, an option enabling individuals to quickly increase their retirement-plan contribution levels to a predetermined percentage of pay, on contribution rates.
  • The analysis was based on data on enrollment in and contributions to retirement plans from Hewitt Associates, a benefits administration and consulting firm. The study used an interrupted time series (ITS) design, analyzing changes in outcomes before and after the implementation of Quick Enrollment or Easy Escalation.
  • The study found that Quick Enrollment increased enrollment rates by 10 to 20 percentage points and that Easy Escalation increased the percentage of employees contributing to their savings plans at the higher, predetermined rate specified by Easy Escalation. 
  • The quality of causal evidence presented in this report is low. This means we are not confident that the estimated effects are attributable to Quick Enrollment or Easy Escalation. Other factors are likely to have contributed to the changes in enrollment and contribution rates.

Intervention Examined

The Quick Enrollment and Easy Escalation

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

  • Across companies A and B, Quick Enrollment increased enrollment rates in retirement accounts by 10 to 20 percentage points.
  • In company B, about 15 percent of those who were enrolled in a savings plan but were contributing a low percentage of their pay increased their contribution to the predetermined 6 percent after Easy Escalation was implemented.

Considerations for Interpreting the Findings

There were four pre-post sets of comparisons of interest in this study: (1) the first implementation of Quick Enrollment for seasoned employees at companies A and B, (2) the second and third waves of Quick Enrollment implementation at company B, (3) the first wave of Easy Escalation implementation at company B, and (4) the second wave of Easy Escalation implementation at company B. Interventions were considered separately based on whether they introduced employees to an investment option or reminded them that the option was available. Therefore, the second and third waves of Quick Enrollment and the second wave of Easy Escalation at company B are reviewed separately from the first introductions of Quick Enrollment and Easy Escalation.

Each intervention reviewed here was implemented only one or two times. This makes it difficult to conclude that the observed changes in enrollment rates were driven by the interventions themselves, instead of other concurrent changes. That is, the implementations could have easily coincided with other changes in policies or procedures. These other changes could drive the observed changes in enrollment and contributions.

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 Quick Enrollment or Easy Escalation. Other factors are likely to have contributed. To provide more convincing evidence of the interventions’ effects that satisfies CLEAR criteria, the authors should consider implementing the program at other firms. If other implementations demonstrated similar effects, we could be more confident that changes in outcomes were driven by the intervention, and not some other concurrent change.

Additional Sources

Beshears, J., Choi, J., Laibson, D., & Madrian, B. (2013). Simplification and Saving. Journal of Economic Behavior & Organization, 95, 130-145.

Reviewed by CLEAR

February 2015