Automatically enrolling employees in savings plans increases participation rates from 20 to 90 percent

The power of the 'default option' is one of the most significant findings in behavioral finance. A landmark 2001 study by Madrian and Shea involving 2.5 million workers found that when employees had to manually sign up for 401(k) plans, participation hovered around 20 percent. However, when the company automatically enrolled them—requiring an action to leave the plan—participation jumped to 90 percent, even when the underlying financial incentives remained identical.