Framing the Add-On Accounts Problem to Maximize Participation

There has been considerable discussion concerning the use of opt-out add-on accounts as a means of increasing national saving.  If one accepts that there are market failures in the retirement saving market, and I do, then the next step is to ask how to solve them.  My preference is generally for market-based incentive regulation rather than government mandates.  In this case, how the problem is structured can help workers make choices that overcome the inherent inefficiencies in the market.  Of particular interest is the “deliberately bad default” which is used to motivate workers to actively participate and make choices consistent with their own preferences (essentially make the bad option more costly than the cost of participation).  But I wonder how well the “deliberately bad default” works for the really lazy worker.  The counter argument is given in the article, "There are no institutional choices that are neutral."  True, but the distribution of costs is worth noting:

Why Do So Many Consumers Choose Frills When Plain-Old Will Do? Pure Laziness, By David Leonhardt, NY Times:  When you cross over the Walt Whitman Bridge from New Jersey into Philadelphia, you are not likely to notice a big change in local driving habits. … Yet if you compare insurance-buying habits in the two states, Pennsylvania starts to look like one big demolition derby. More than half of the state's drivers buy something called a full-tort policy. It can cost hundreds of extra dollars a year. ...  In New Jersey, only one of every 12 drivers signs up for full-tort insurance. Everyone else has a bargain limited-tort policy, which restricts potential damages.  So what, if not driving habits, might explain the great difference? Basic human laziness.  Pennsylvanians who do not sign a piece of paper saying they want the limited policy automatically receive the full-tort one. … This, in the land of social science, is called a framing problem. … the answer you get depends on the question you ask. … "People are extremely passive," James J. Choi, an economist at Yale, said. "They can be pushed around quite a bit, even when there are no formal restrictions on what they can do."  At McDonald's, people buy the combo meal when they might rather just have a small order of fries with their Quarter Pounder. ... For their 401(k), many workers simply accept the contribution rate and the investment choices their company picks for them. In countries where being an organ donor is the default choice on driver's licenses, many more people are listed as organ donors. ...

[S]ome economists have begun making a novel argument. … [T]he more severe and the worse that a default option is, the better off people will be. Only then will they take matters into their own hands.  In many cases, obviously, companies have no interest in changing consumers' behavior. … But a good number of framing problems are different. With car insurance, retirement savings and some other matters, government regulators and benevolent employers can help people make better decisions simply by changing the question that is being asked. … At companies where 401(k) enrollment is automatic, about 85 percent of workers sock away money for retirement in the plan ... When employees have to sign up for a 401(k), only about 33 percent sign up within six months. After three years, the portion rises to more than 60 percent, suggesting that most people do want to save.  … But helping workers save … is not as simple as making it the default option. … This is where the deliberately bad default comes in. If a company set (sic) the fallback savings rate at 15 percent, surely most workers would take the time to make individual decisions about their retirement. A 15 percent bite out of the paycheck tends to focus the mind.  ... But the thing about framing problems is that there is no escaping them. As Mr. Choi says, "There are no institutional choices that are neutral."  No matter what the fallback is, it will attract people. So we might as well at least try to pick ones that maximize - or, at least initially, minimize - our well-being.