In 2001 the economists Brigitte Madrian and Dennis Shea published a study of a large U.S. company that switched its 401(k) retirement plan to automatic enrollment. New employees were “automatically and immediately enrolled in the 401(k) plan unless they made a negative election.”
“401(k) participation is significantly higher under automatic enrollment.” Employees hired under the new rule also tended to keep the default contribution rate and investment. The authors attributed this to “participant inertia” and to employees seeing the default as investment advice. They concluded that “large changes in savings behavior can be motivated simply by the power of suggestion.”