Defined Contribution Retirement Plan: Comparing Savings Behaviors Between Automatic Enrollment and Voluntary Enrollment

Using nationally representative data from the Health and Retirement Study and employing longitudinal mixed-effects models, along with the Mundlak correction, we compared retirement savings behaviors, measured by active participation (making contributions) and deferral rate (the rate of contribution out of the maximum allowed deferred income), between automatic and voluntary enrollment. The results revealed that while automatic enrollment is associated with higher overall plan participation, it is also linked to lower active participation rates and lower individual deferral rates. Notably, once the analysis was restricted to active participants, the enrollment type did not show a significant relationship with the deferral rates of those who had already decided to participate.

Additionally, we identified a significant interaction between enrollment type and employer match, suggesting that employer match is associated with higher deferral rates among auto-enrolled participants. The implications of these results emphasize the need for employers and policymakers to refine automatic enrollment strategies to support retirement savings outcomes.