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Scary study shows 401(k) matching doesn’t work

Behavioral economics research discovers “common sense” 401k plan policies are more myth than reality. What can plan sponsors do to help improve their plans – at least from their employees’ perspective?

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Every 401(k) plan sponsor knows the best way to encourage employee contributions is to offer a match, right? But a recent study suggests this might not be the case. James J. Choi (Yale), David Laibson (Harvard) and Brigitte C. Madrian (Harvard) make this startling argument in their paper “$100 Bills on the Sidewalk: Suboptimal Investment in 401k Plans” to be published in The Review of Economics and Statistics.

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