1. Recent automatic enrollment research
Steve Utkus
Vanguard Center for Retirement Research
May 2008

2. Two-part research agenda
Effectiveness research
50 plans (covering 120,000 eligible employees) adopting AE over period, compared with over 500 plans with voluntary enrollment
Overwhelmingly AE for new hires only
90%+ plans with initial contribution of 2-4%. Half with auto-escalate feature.
With Nessmith and Young at Vanguard.
Literacy and trust research
Three employer plans with voluntary or automatic enrollment covering 9,500 new hires
Within this group, over 800 participated in survey on literacy and trust
With Agnew and Szykman at William and Mary. Paper at

3. Automatic enrollment – high-level benefits
Participation rates
Default investments (contributions)
Source: Vanguard, 2007.

4. Automatic enrollment – savings tradeoff
Participant contribution rates
Employee contribution rates
Source: Vanguard, 2007.

5. Automatic enrollment – demographic effects
Participation rates by select demographic variables
Source: Vanguard, 2007.

6. Research results – voluntary enrollment plans
Marginal effects on participation rates
Source: Vanguard, 2007.
* Not statistically significant.

7. Research results – automatic enrollment plans
Marginal effects on participation rates
Source: Vanguard, 2007.
* Not statistically significant.

8. Implications
Opt-out savings regimes do improve savings outcomes dramatically, in keeping with default or framing effects.
These effects are strongest for groups who are traditionally associated with low rates of saving—especially young and low-wage workers. Yet the effects also appear among older and high-wage workers.
Both financial illiteracy and mistrust play a crucial role in raising quit rates under automatic enrollment.
Despite success of automatic enrollment, two issues remain:
Inadequacy of total contributions. 40% of plans have total savings < 9%
The problem of “quitters”