Hostname: page-component-5cf477f64f-fcbfl Total loading time: 0 Render date: 2025-04-01T02:24:19.479Z Has data issue: false hasContentIssue false
  • English
  • Français

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: ahung@rand.org
Get access Rights & Permissions [Opens in a new window]

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

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aon Hewitt Associates (2011) Leakage of Participants’ DC Assets: How Loans, Withdrawals, and Cashouts are Eroding Retirement Income. Available at http://www.aon.com/attachments/thought-leadership/survey_asset_leakage.pdf, accessed December 2018.Google Scholar
Armour, P, Hurd, MD and Rohwedder, S (2017) Trends in pension cash-out at job change and the effects on long-term outcomes. In Wise, D (ed.) Insights in the Economics of Aging, Chicago: University of Chicago Press, pp. 15–39.Google Scholar
Beshears, J, Choi, JJ, Laibson, D, Madrian, BC and Skimmyhorn, W (2017) Borrowing to save? The impact of automatic enrollment on debt. Working paper.Google Scholar
Beshears, J, Choi, JJ, Laibson, D and Madrian, BC (2018) Potential versus realized savings under automatic enrollment. TIAA Institute Research Dialogue. Issue No. 148. July.Google Scholar
Copeland, C (2013) Lump-sum distributions at job change, distributions through 2012. EBRI Notes 34, 2–13.Google Scholar
Engelhardt, GV (2002) Pre-retirement lump-sum pension distributions and retirement income security: evidence from the Health and Retirement Study. National Tax Journal 55(4), 665–685.CrossRefGoogle Scholar
Madrian, BC and Shea, DF (2001) The power of suggestion: inertia in 401(K) participation and savings behavior. The Quarterly Journal of Economics 116, 1149–1187.CrossRefGoogle Scholar
Purcell, P (2009) Pension issues: lump-sum distributions and retirement income security. Federal Publications 586. Available at https://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1591&context=key_workplace.Google Scholar