401(k) plan automatic escalation (or auto-escalation) is related to 401(k) plan automatic enrollment. It automatically increases an employee’s contribution amount as a way to subtly increase savings at regular intervals until a pre-set cap is reached.
Auto escalation is effective in combating contribution stasis, in which a contribution percentage is chosen by a plan participant upon initially entering the plan and remains the same years later and long after savings requirements dictate the need for an increase.
Nobel Prize-winning research in the discipline of behavioral economics found that such an automatic strategy is effective in encouraging retirement savings by employees.