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The Automatic 401(k): Revenue & Distributional Estimates

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Publication Date: October 2008

Publisher(s): Tax Policy Center

Author(s): Christopher Geissler; Benjamin H. Harris

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Economics (Economic theory)

Keywords: Retirement/Pensions; Taxes and Social Programs; General Tax Policy; Taxes and Social Policy

Type: Paper

Abstract:

One promising aspect of retirement saving policy in recent years is the "automatic" or opt-out features in 401(k) plans. Automatic 401(k)s enable saving even if the worker makes no effort to participate in their 401(k) plan. Prior research has shown that automatic enrollment increased participation in 401(k) from 75 percent to as high as 90 percent of newly eligible employees; with the highest change among lower-income and minority workers. This paper provides estimates of the effects - on federal revenue and the distribution of after-tax income - of a policy under which all 401(k) plans are converted to automatic 401(k)s.