Auto Escalation doesn’t negatively impact participation

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.

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