Offering participants too many options can discourage enrollment. But what’s the “sweet spot” in terms of the optimal number of enrollment options? A test by Fidelity found that 78% of participants preferred a three-part enrollment option — and that those who chose that option contributed more.
In “Can the Enrollment Experience Improve Participant Outcomes?” Fidelity found that 74% of the 536 employers it studied said there was low employee interest in retirement topics; 72% also said there was a low savings level. The white paper cites research finding that:
- enrollment drops 1.5% to 2% for every 10 new options offered to participants; and
- participation rises when employees are given fewer and simpler options and decisions to make.
So Fidelity tested an enrollment option with three predetermined elements:
- three contribution rates enrollees could choose from;
- a single investment option; and
- an annual percentage increase.
Fidelity found that 78% of participants in the study preferred this simpler enrollment option, and that those who chose it deferred a higher percentage of their pay to their DC plan accounts.
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