Wharton Pension Research Council Working Papers


Mingli Zhong

Document Type

Working Paper

Date of this Version



Many U.S. states are launching state-sponsored auto-enrollment retirement plans, with the goal of boosting retirement savings among private-sector workers lacking access to employersponsored retirement plans. This paper provides an analysis of state-sponsored auto-enrollment plans, and specifically, the plan's default contribution rate. We develop a tractable framework to derive the optimal default contribution rate taking into account workers' decisions on adhering to the default contribution rate. The optimal default contribution rate is shaped by the social benefits of increased savings due to adherence to the default that keeps workers from undersaving, while reducing reliance on means-tested social transfers. The optimal default contribution rate is also counterbalanced by the social benefits of action when an undesirable default option compels workers to make an active decision. To estimate these counterbalancing social welfare forces, we use individual-level administrative and survey data from OregonSaves, the state-sponsored plan offered by the Oregon state government, and suggest the optimal default contribution rate to be 8%.


OregonSaves, state-sponsored retirement plans, auto-enrollment retirement plans, default contribution rate

Working Paper Number


Copyright/Permission Statement

All findings, interpretations, and conclusions of this paper represent the views of the author and not those of the Wharton School, the Pension Research Council, the SSA, any agency of the federal government, the MRRC, OregonSaves, or any other institutions with which she is affiliated. © 2020 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The author is extremely grateful to her advisors Hanming Fang, Benjamin B. Lockwood, and Olivia S. Mitchell for their guidance and support, and to Mike Abito, Alex Rees-Jones, Katja Seim, and Lin Shen for extensive discussions. She also thanks participants at the Wharton Applied Economics Workshop and the 21st Annual SSA Research Consortium Meeting for helpful comments. This research was supported by a grant from the US Social Security Administration (SSA) to the Michigan Retirement Research Center (MRRC) as part of the Retirement Research Consortium (RRC). Support was also provided by the AARP; the Pew Foundation; the Pension Research Council/Boettner Center of the Wharton School at the University of Pennsylvania; the Quartet program at the University of Pennsylvania; and the TIAA Institute. The author thanks many individuals from the OregonSaves program for numerous discussions and insights into the OS program, and Yong Yu as well as Wenliang Hou for excellent research assistance.

Included in

Economics Commons



Date Posted: 08 January 2020