A new study suggests that plan sponsors can increase the rate of automatic enrollment in 401(k) plans without decreasing participation.
The results are based on a new study conducted by Voya Behavioral Finance Institute for Innovation.
It did show that nearly all individuals who enroll in auto-escalation choose to keep the default a 1% escalation.
The results of the study showed that an opportunity exists for employers to increase the default to 2% without significantly decreasing employee participation in the escalation feature of the plan. The higher default escalator of 2% did not meaningfully increase the number of employees who initially declined auto-escalation altogether.
One caveat is that the more aggressive default delays, which led to escalation beginning sooner, did modestly reduce escalation enrollment from 23% to 18%, the research shows.