It's been 10 years since we saw a rare convergence of theindustry, regulations, and academics with the signing of thePension Protection Act (PPA) in 2016. Among the gems included inthis legislation is the encouragement of the use of auto-enrollment. This “nudge” concept,advocated in part by strong academic studies, shifts the defaultfrom opting-in to opting-out. This takes advantage of the nativedecision-making inertia all too often exhibited by humans — thatis, not making a decision.
The fruits of this reframing have been borne out by increasedparticipation rates. According to the U.S. Bureau of LaborStatistics, significantly more employees participate in 401(k)plans with auto-enrollment versus those that participate in401(k) plans without auto-enrollment. Thisoutcome matches the intention of the 2016 PPA.
Perhaps “matches” wasn't the best word to use. Theorists fearedauto-enrollment would remove the need for companies to offer amatching incentive to employees. Indeed, based on the mean data,this appears to be the case. The mean maximum match of 3.5 percentfor plans without auto-enrollment is nearly 10 percent higher thanthe mean maximum match for plans without auto-enrollment.
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