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Imperfect Knowledge of Pension Plan Type

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  • Alan L. Gustman
  • Thomas Steinmeier
  • Nahid Tabatabai

Abstract

This paper investigates the reasons for discrepancies between the pension plan type reported by respondents to the Health and Retirement Study (HRS) and pension plan type obtained from documents produced by their employers, called Summary Plan Descriptions (SPDs). The analysis suggests the discrepancies are sizable and are mainly due to misreports by respondents. Discrepancies between respondent and firm reports of plan type are first documented for different years and from different data sources. Changes over time in respondent and firm reports are analyzed for those who say their plans did not change. Plan type from payroll data produced by Watson Wyatt, a pension consulting company, is examined and compared to respondent reports for employees covered by Watson Wyatt plans. The Watson Wyatt payroll data report plan type without error, and yet we find the patterns of discrepancies between respondent and firm provided data are the same as for the HRS employer and respondent data. We also explore other evidence gathered by the HRS in the course of interviews and various experiments. Our findings that errors are mainly the result of misreporting by respondents, together with findings from experiments, suggest a number of changes in survey design that can help to reduce reporting error. They also suggest that models of retirement and saving behavior should allow for imperfect knowledge by decision makers.

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File URL: http://www.nber.org/papers/w13379.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13379.

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Date of creation: Sep 2007
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Publication status: published as as “Do Workers Know About Their Pension Plan Type? Comparing Workers’ and Employers’ Pension Information". In "Overcoming the Saving Slump; How to Increase the Effectiveness of Financial Education and Saving Programs," Anna Lusardi, editor, 2008. Chicago: University of Chicago Press, pp. 47-81
Handle: RePEc:nbr:nberwo:13379

Note: AG LS PE
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  1. Alan L. Gustman & Thomas L. Steinmeier, 1988. "An Analysis Of Pension Benefit Formulas, Pension Wealth And Incentives From Pensions," NBER Working Papers 2535, National Bureau of Economic Research, Inc.
  2. Olivia S. Mitchell, 1987. "Worker Knowledge of Pension Provisions," NBER Working Papers 2414, National Bureau of Economic Research, Inc.
  3. Sewin Chan & Ann Huff Stevens, 2003. "What You Don't Know Can't Help You: Pension Knowledge and Retirement Decision Making," NBER Working Papers 10185, National Bureau of Economic Research, Inc.
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Cited by:
  1. Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2011. "Behavioral economics perspectives on public sector pension plans," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(02), pages 315-336, April.

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