The tyranny of low expectations strikes retirement plan participants, too.

According to a recent paper released by Windsor, Conn.-based Voya Financial, in conjunction with researchers at Harvard, UCLA and the University of Pennsylvania, retirement plan sponsors may do their employees more harm than good by setting default contribution rates too low.

While most retirement plans use a default contribution rate of between 3 and 6 percent, ostensibly out of concern that a high default rate would deter plan participation, the study concludes that plan sponsors can increase their employees default contribution rates to 10 percent or more without a significant reduction in enrollment.

"Many employers are reluctant to suggest higher contribution rates due to a concern that their workers might blindly accept what is not in their best interest, or that they might get intimidated and opt out of the plan altogether," said Shlomo Benartzi, professor at the UCLA Anderson School of Management, in a statement. "However, no one had researched these concerns using a scientific approach. Would plan participants accept a 7, 8 or 9 percent savings rate? Can we push it even higher into double digits? Through this study, our team found these preconceived fears were largely unwarranted."

As it turned out, a higher default contribution rate served as an anchor for plan participants’ savings over time, not as a deterrent. When plan enrollees were randomly assigned a default contribution rate between 6 and 11 percent, the researchers observed little difference in participation rates as the default contribution increased. The most significant drop in participation, 3.7 percent, occurred when the default contribution rate was increased from 10 percent to 11 percent.

On the other hand, as participants were presented with a higher default contribution rate, they were more likely to select a contribution rate lower than the default.

Nevertheless, when the researchers tracked the next 60 days of plan participation, the enrollees with higher default contribution rates displayed improved financial security and higher overall average contribution rates. For each percentage point increase in default contribution rates over 6 percent, participants’ average contribution rate increased by 20 to 50 basis points.

Participants’ savings levels increased alongside the default contribution rates, with the most significant rise between 6 and 7 percent.

In real dollar terms, the study suggests that behavioral modification through higher default contribution rates may create better outcomes across an employee’s life cycle. According to the study, a plan participant with a $70,000 annual salary could produce an additional $22,000 to $57,000 in retirement savings over a 40-year career for each additional percentage point increase in his or her default contribution rate above 6 percent.

The research was conducted from November 2016 through July 2017 and involved 10,000 plan participants who were employees of Voya’s client companies.