Not a Member? Get access to HR news and resources that you can trust.
We asked HR professionals to tell us about their time in HR. Here are their stories.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Instructor-led guidance for your SHRM-CP/SHRM-SCP exam, no travel or time out of the office required.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
American economist Richard Thaler won the Nobel Memorial Prize in Economic Sciences partially for nudging employers toward automatically enrolling their employees in retirement savings plans.
We've rounded up the latest news on Thaler's accomplishment. Below are
SHRM Online resources and news articles from other trusted media outlets.
In announcing the prize in Stockholm on Monday, the Nobel committee said it was honoring Thaler for groundbreaking work in establishing that people are predictably irrational and they consistently act against their own best economic interests.
That includes not saving for their future.
In his book,
Nudge: Improving Decisions about Health, Wealth and Happiness (Penguin, 2009), written with Cass Sunstein, Thaler theorized that employers can gently prod their employees to plan for retirement by automatically enrolling them in 401(k) plans rather than waiting for them to sign up on their own. Thaler reportedly inspired Congress to overhaul the nation's 401(k) system—a change that helped millions of Americans plan for retirement.
Researchers estimate that in the last decade Thaler, who had a cameo in the film
The Big Short, has helped people save $29.6 billion toward their retirement.
"In order to do good economics, you have to keep in mind that people are human," Thaler said at a news conference after the prize was announced. And they don't always do what's best.
Asked how he intends to spend the $1.1 million prize, Thaler said "This is quite a funny question. I will try to spend it as irrationally as possible."
(The New York Times, MarketWatch)
A Gentle Nudge Toward Savings
Thaler is credited with the idea that employers should automatically sign their employees up for retirement savings accounts, rather than wait for them to fill out 401(k) paperwork. They can always opt out of the plans.
According to the
Society for Human Resource Management's
2017 Employee Benefits report, "most organizations offer retirement plans to help employees save and plan for their financial future."
Defined benefit contribution plans are "the most common, with 90 percent offering a traditional 401(k) or similar plan and 55 percent offering a Roth 401(k) or similar plan."
As SHRM research reveals:
[SHRM members-only how-to guide:
How to Design an Employee Benefits Program]
Thaler and other behavioral economists point out that employees are their own worst enemies when it comes to saving for their retirement.
Without help saving money, Thaler argued, employees would never retire. "Probably [behavioral economics'] biggest impact is changing the way retirement plans are run," Thaler said in a speech at the CFA Institute annual conference in May. The Charlottesville, Va.-based institute is a global association of investment professionals.
(SHRM Research, Bloomberg)
Automatic Enrollment in 401(k) Rises
While Thaler popularized the notion of automatic enrollment with the book
Nudge, it wasn't until he collaborated with Shlomo Benartzi, a behavioral economist at the University of California at Los Angeles, that he realized auto-escalation could help people save significantly more for their future.
The objective of auto-escalation is to regularly increase the amount of money people are putting aside each year. For example, employees may think it is impossible to allocate 15 percent of their salaries annually for retirement—something experts say is a suitable target for many middle- and upper-income employees. Auto-escalation tackles this by encouraging employees to increase their contributions to 401(k) plans by a percentage point each year. Most employers now make auto-escalation an optional feature of their retirement plans, according to the PSCA.
Experts have long encouraged HR professionals to assist their employees with financial wellness checkups.
Nancy Cannon, manager of workplace solutions at Mutual of Omaha Insurance Co., a financial benefit provider, said "Education is the backbone to any financial wellness program. [Organizations should] assure employees that they are in a safe environment where they can learn and feel comfortable asking questions and seeking more information" about their financial future.
(Time, SHRM Online)
Related SHRM Articles:
Employers Sharply Increased Financial Well-Being Benefits in 2017, SHRM Online Benefits, June 2017
Employers Are Raising 401(k) Default Savings Rates to 6%, SHRM Online Benefits, August 2016
Auto Escalation Beats Inertia, So Why the Hesitancy? SHRM Online Benefits, February 2016
Was this article useful? SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more. Join/Renew Now and let SHRM help you work smarter.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
HR Education in a City Near You
SHRM’s HR Vendor Directory contains over 3,200 companies