Automatic Enrollment, Employee Compensation, and Retirement Security

Barbara A. Butrica Nadia S. Karamcheva

WP#2012-25

Abstract

This study uses restricted microdata from the National Compensation Survey to examine the impact of auto enrollment on employee compensation.  By boosting plan participation, automatic enrollment likely increases employer costs when previously unenrolled workers receive matching retirement plan contributions.  Our data show significant negative correlation between employer match rates and automatic enrollment provision.  We find no evidence that total costs differ between firms with and without automatic enrollment, and no evidence that defined contribution costs crowd out other forms of compensation, suggesting that firms might be lowering their potential and/or default match rates enough to completely offset the higher costs of automatic enrollment without needing to reduce other compensation costs.