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Pension Substitution in the 1980s: Why the Shift Toward Defined Contribution Pension Plans?

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  • Douglas L. Kruse

Abstract

The relative decline of defined benefit (DB) pension plans, and growth of defined contribution (DC) plans, has been often noted but not extensively explored. This paper reports on the construction of a new longitudinal company-based dataset on pension plans for the years 1980-86 (including all U.S. companies with large plans, and a 10% sample of companies with small plans, within this period). Among the findings are that the decline in DB coverage is primarily due to fewer participants in companies maintaining such plans, while very little of the growth in DC coverage is due to companies terminating DB plans. Also, multinomial logit analysis of manufacturing company choices indicates that the higher administrative costs of DB plans play a statistically significant, but small, role in their decline, while new pension adopters in less stable industries are more likely to choose DC plans.

Suggested Citation

  • Douglas L. Kruse, 1991. "Pension Substitution in the 1980s: Why the Shift Toward Defined Contribution Pension Plans?," NBER Working Papers 3882, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3882
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    References listed on IDEAS

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    1. Stone, M, 1987. "A Financing Explanation For Overfunded Pension Plan Terminations," Journal of Accounting Research, Wiley Blackwell, vol. 25(2), pages 317-326.
    2. Alan L. Gustman & Thomas L. Steinmeier, 1989. "The Stampede Toward Defined Contribution Pension Plans: Fact or Fiction?," NBER Working Papers 3086, National Bureau of Economic Research, Inc.
    3. Ippolito, Richard A, 1985. "The Labor Contract and True Economic Pension Liabilities," American Economic Review, American Economic Association, vol. 75(5), pages 1031-1043, December.
    4. Hamdallah, Ahmed El-Sayed & Ruland, William, 1986. "The decision to terminate overfunded pension plans," Journal of Accounting and Public Policy, Elsevier, vol. 5(2), pages 77-91.
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    Cited by:

    1. Andrew A. Samwick & Jonathan Skinner, 1996. "Abandoning the Nest Egg? 401(k) Plans and Inadequate Pension Saving," NBER Working Papers 5568, National Bureau of Economic Research, Inc.
    2. Josiah, J. & Gough, O. & Haslam, J. & Shah, N., 2014. "Corporate reporting implication in migrating from defined benefit to defined contribution pension schemes: A focus on the UK," Accounting forum, Elsevier, vol. 38(1), pages 18-37.
    3. David E. Bloom & Richard B. Freeman, 1992. "The Fall in Private Pension Coverage in the U.S," NBER Working Papers 3973, National Bureau of Economic Research, Inc.

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