The study involved low and middle income workers who were H&R Block clients in St. Louis, Missouri and was built around the company’s Express IRA, which permits clients to make contributions to an IRA while preparing their taxes and allows the IRA to be funded with part or all of their federal income tax refunds or from other sources, according to the study.
While preparing taxes, each client would be randomly selected to qualify for a matching contribution into an IRA; the match would be 0% (the control group), 20%, or 50%, of up to $1,000 of the client’s contribution. These matches had a significant impact on the take-up rates of the IRA, which were 3%, 10% and 17%, respectively for the control group, the 20% match group, and the 50% match group.
The study reported average contribution levels, excluding the match, of $860 for the 0% match rate group; $1,280 for the group receiving a 20% match; and $1,310 for those making 50% on their contribution. The average IRA contributions (excluding the match) for the 20% match group was 4 times higher than the control group and for the 50% match group was 8 times higher than the control group.
The incentivizing impact of a matching contribution has been borne out in other surveys, and a recent survey by the Employee Benefit Research Institute (EBRI) suggests that non-participants will be more willing to participate if a company match was offered (see Workers: ‘Show Me the Money’ to Beef Up Participation ).
The Retirement Security Project, sponsored by the Brookings Institute and Georgetown University , completed this study with assistance from H&R Block. H&R Block paid the costs of the program, including: the matching contributions, advertising materials, and the training of staff.
The study can be found HERE