A recent study by Boston College's Center for Retirement Research might not exactly be the New Year's news that plan sponsors and plan administrators are looking for: Simply nudging people into more vested 401(k) participation through a high default deferral rate may do very little to increase overall financial participation in the plans.
The research, "A Nudge Isn't Always Enough," suggests that setting a particularly high default rate for new participants in a workplace 401(k) plan may in fact produce the very opposite effect, with participants immediately opting for a lower deferral.
The same was found in an experimental project that hoped to get low-income earners to immediately set aside their tax refunds into a formalized retirement savings plan. When H&R Block offered to match its clients' tax refunds for purposes of investing in an IRA, the results were somewhat positive, though they did not create massive changes; a similar program to encourage low-income earners to purchase U.S. Savings Bonds with their refunds got only a 6 percent response.
A more recent program making it easy for low-income earners to instantly funnel their refunds into a bonds program - complete with plenty of in-office advertising of the benefits of participating in the Savings Bonds - uncovered similar results.