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Automatic enrollment and job market turnover

Published online by Cambridge University Press:  26 February 2019

Angela A. Hung ,
Jill Luoto ,
Jeremy Burke ,
Stephen P. Utkus  and
Jean A. Young
Angela A. Hung*
Affiliation:
RAND Corporation, Santa Monica, CA, USA
Jill Luoto
Affiliation:
RAND Corporation, Santa Monica, CA, USA
Jeremy Burke
Affiliation:
Center for Economic and Social Research, University of Southern California, 635 Downey Way, Los Angeles, California, USA
Stephen P. Utkus
Affiliation:
Vanguard Center for Investor Research, Malvern, PA, USA
Jean A. Young
Affiliation:
Vanguard Center for Investor Research, Malvern, PA, USA
*
*Corresponding author. Email: [email protected]
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Abstract

Automatic enrollment has substantially increased employee participation in defined contribution plans. Yet little is known about how retirement plan design features influence retirement wealth accumulation in a setting of labor market turnover. We find that employees separating from jobs with automatic enrollment plans are significantly more likely to take a cash distribution (and potentially pay a tax penalty) than those separating from jobs with voluntary enrollment plans, offsetting some of the benefits from automatic enrollment. Yet given the sizeable improvements in plan participation from automatic enrollment, wealth accumulation for automatically enrolled participants, net of cash-outs and penalties, remain higher than it would have been under voluntary enrollment.

Keywords

Automatic enrollmentdefined contributionfinancial decision makingretirement savings
Type
Article
Information
Journal of Pension Economics & Finance , Volume 20 , Special Issue 4: New Longitudinal Data for Retirement Analysis and Policy , October 2021 , pp. 547 - 557
Copyright
Copyright © Cambridge University Press 2019

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