Search
 

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?

By Chris Carosa | Updated on June 08, 2011

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.

Can years of “common sense” plan design be swept away as easily as the researchers have discovered this truth? All 401(k) plan sponsors have a fiduciary duty to the beneficiaries of the plan (i.e., the employees). Part of that duty entails keeping abreast of studies like this. Now, no one expects the folks in HR or C-level executives to spend their days reading academic journals. Fortunately, there are plenty of media outlets specializing in fiduciary and plan sponsor news and events they can peruse at their leisure.

Complete your profile to continue reading and get FREE access to BenefitsPRO.com, part of your ALM digital membership.

Your access to unlimited BenefitsPRO.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical BenefitsPRO.com information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Recommended Stories

BenefitsPRO

Join BenefitsPRO

Don’t miss crucial news and insights you need to navigate the shifting employee benefits industry. Join BenefitsPRO.com now!

  • Unlimited access to BenefitsPRO.com - your roadmap to thriving in a disrupted environment
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
  • Exclusive discounts on BenefitsPRO.com and ALM events.

Already have an account? Sign In Now
Join BenefitsPRO

Copyright © 2024 ALM Global, LLC. All Rights Reserved.