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Plan Design and 401(k) Savings Outcomes

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  • Choi, James J.
  • Laibson, David
  • Madrian, Brigitte C.

Abstract

We assess the impact of 401(k) plan design on four different 401(k) savings outcomes: participation in the 401(k) plan, the distribution of employee contribution rates, asset allocation, and cash distributions. We show that plan design can have an important effect on all of these savings outcomes. This suggests an important role for both employers in determining how to structure their 401(k) plans and government regulators in creating institutions that encourage or discourage particular aspects of 401(k) plan design.

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Bibliographic Info

Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 57 (2004)
Issue (Month): 2 (June)
Pages: 275-98

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Handle: RePEc:ntj:journl:v:57:y:2004:i:2:p:275-98

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  1. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
  2. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2001. "Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance," NBER Working Papers 8655, National Bureau of Economic Research, Inc.
  3. Gary V. Engelhardt & Anil Kumar, 2006. "Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study," DNB Working Papers, Netherlands Central Bank, Research Department 079, Netherlands Central Bank, Research Department.
  4. Papke, Leslie E. & Poterba, James M., 1995. "Survey evidence on employer match rates and employee saving behavior in 401(k) plans," Economics Letters, Elsevier, Elsevier, vol. 49(3), pages 313-317, September.
  5. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2002. "Defined Contribution Pensions: Plan Rules, Participant Choices, and the Path of Least Resistance," NBER Chapters, National Bureau of Economic Research, Inc, in: Tax Policy and the Economy, Volume 16, pages 67-114 National Bureau of Economic Research, Inc.
  6. Bassett, William F. & Fleming, Michael J. & Rodrigues, Anthony P., 1998. "How Workers Use 401(k) Plans: The Participation, Contribution, and Withdrawal Decisions," National Tax Journal, National Tax Association, National Tax Association, vol. 51(n. 2), pages 263-89, June.
  7. Richard H. Thaler & Shlomo Benartzi, 2001. "Naive Diversification Strategies in Defined Contribution Saving Plans," American Economic Review, American Economic Association, American Economic Association, vol. 91(1), pages 79-98, March.
  8. Gabriel D. Carroll & James J. Choi & David Laibson & Brigitte Madrian & Andrew Metrick, 2005. "Optimal Defaults and Active Decisions," NBER Working Papers 11074, National Bureau of Economic Research, Inc.
  9. Gur Huberman & Sheena Iyengar & Wei Jiang, 2007. "Defined Contribution Pension Plans: Determinants of Participation and Contributions Rates," Journal of Financial Services Research, Springer, Springer, vol. 31(1), pages 1-32, February.
  10. Alicia H. Munnell & Annika Sunden, 2002. "401(k)s And Company Stock: How Can We Encourage Diversification?," Issues in Brief, Center for Retirement Research ib-9, Center for Retirement Research.
  11. Richard Thaler & Shlomo Benartzi, 2004. "Save more tomorrow: Using behavioral economics to increase employee saving," Natural Field Experiments, The Field Experiments Website 00337, The Field Experiments Website.
  12. Leslie E. Papke, 1992. "Participation in and Contributions to 401(k) Pension Plans: Evidence om Plan Data," NBER Working Papers 4199, National Bureau of Economic Research, Inc.
  13. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2004. "For Better or for Worse: Default Effects and 401(k) Savings Behavior," NBER Chapters, National Bureau of Economic Research, Inc, in: Perspectives on the Economics of Aging, pages 81-126 National Bureau of Economic Research, Inc.
  14. Cunningham, Christopher R. & Engelhardt, Gary V., 2002. "Federal Tax Policy, Employer Matching, and 401(k) Saving: Evidence from HRS W-2 Records," National Tax Journal, National Tax Association, National Tax Association, vol. 55(3), pages 617-45, September.
  15. Bernheim, B. Douglas & Garrett, Daniel M., 2003. "The effects of financial education in the workplace: evidence from a survey of households," Journal of Public Economics, Elsevier, Elsevier, vol. 87(7-8), pages 1487-1519, August.
  16. William E. Even & David A. Macpherson, 2004. "Determinants and Effects of Employer Matching Contributions in 401(k) Plans," Labor and Demography, EconWPA 0405001, EconWPA.
  17. James Choi & David Laibson & Brigitte Madrian & Andrew Metrick, 2003. "Passive Decisions and Potent Defaults," NBER Working Papers 9917, National Bureau of Economic Research, Inc.
  18. Papke, Leslie E., 2004. "Individual financial decisions in retirement saving plans: the role of participant-direction," Journal of Public Economics, Elsevier, Elsevier, vol. 88(1-2), pages 39-61, January.
  19. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2003. "Optimal Defaults," American Economic Review, American Economic Association, American Economic Association, vol. 93(2), pages 180-185, May.
  20. James M. Poterba & Steven F. Venti & David A. Wise, 1995. "Lump-Sum Distributions from Retirement Saving Plans: Receipt and Utilization," NBER Working Papers 5298, National Bureau of Economic Research, Inc.
  21. Shlomo Benartzi & Richard H. Thaler, 2002. "How Much Is Investor Autonomy Worth?," Journal of Finance, American Finance Association, American Finance Association, vol. 57(4), pages 1593-1616, 08.
  22. James M. Poterba, 2003. "Employer Stock and 401(k) Plans," American Economic Review, American Economic Association, American Economic Association, vol. 93(2), pages 398-404, May.
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