Research by a 401(k) plan services provider found all racial and ethnic groups were more likely to participate in plans with automatic employee enrollment, according to the Society for Human Resource Management.
The results were not equal for all groups, however. Enrollment rates for black workers increased from 57 percent with voluntary enrollment to 94 percent with automatic enrollment. Similarly, enrollment among hispanic workers grew from 67 percent to 95 percent. The change was even larger among low-income workers, typically enrolling at a rate of 93 percent or higher with automatic enrollment, compared to about 35 percent without.
"This study confirms that the use of automatic plan design does reduce racial and ethnic disparities in saving and investing behavior through defined contribution retirement plans," said the report's lead author Cyndy Pagliaro. She noted plans must be designed carefully to result in long-term savings for all groups.
The analysis also found automatic enrollment plans, which typically have increasingly conservative plans as retirement approaches, tended to reduce the imbalance of risk-taking among workers. The resulting, more balanced investments, are financially safer for many employees.
