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Determinants and Effects of Employer Matching Contributions in 401(k) Plans

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Author Info

  • William E. Even

    (Miami University)

  • David A. Macpherson

    (Florida State University)

Abstract

This paper uses data from the April 1993 Pension Supplements to the Current Population Survey to investigate the impact of employer matching and employee tenure on participation levels in 401(k) plans. While earlier studies examine similar issues, this study makes several advances. First, consistent with the theory that employers may use matching contributions to satisfy nondiscrimination rules, the study shows that correcting for the endogeneity of employer matching substantially increases the estimated effect of matching on participation levels. Second, the study provides evidence that the large positive association between employee tenure and 401(k) participation is because 'stayers' tend to be 'savers'.

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File URL: http://128.118.178.162/eps/lab/papers/0405/0405001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 0405001.

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Length: 33 pages
Date of creation: 03 May 2004
Date of revision:
Handle: RePEc:wpa:wuwpla:0405001

Note: Type of Document - pdf; pages: 33
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Web page: http://128.118.178.162

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Cited by:
  1. Mark Schreiner, 2001. "Match Rates and Savings: Evidence from Individual Development Accounts," Microeconomics 0108003, EconWPA, revised 27 Dec 2001.
  2. Anja Decressin & Julia Lane & Kristin McCue & Martha Stinson, 2005. "Employer-Provided Benefit Plans, Workforce Composition and Firm Outcomes," Longitudinal Employer-Household Dynamics Technical Papers 2005-01, Center for Economic Studies, U.S. Census Bureau.
  3. James J. Choi & David Laibson & Brigitte C. Madrian, 2004. "Plan Design and 401(k) Savings Outcomes," NBER Working Papers 10486, National Bureau of Economic Research, Inc.
  4. Olivia S. Mitchell & Stephen P. Utkus & Tongxuan (Stella) Yang, 2005. "Turning Workers into Savers? Incentives, Liquidity, and Choice in 401(k) Plan Design," NBER Working Papers 11726, National Bureau of Economic Research, Inc.
  5. Olivia S. Mitchell & Gary R. Mottola & Stephen P. Utkus & Takeshi Yamaguchi, 2006. "The Inattentive Participant: Portfolio Trading Behavior in 401(k) Plans," Working Papers wp115, University of Michigan, Michigan Retirement Research Center.
  6. Alicia H. Munnell & Laura Quinby, 2010. "Why Did Some Employers Suspend Their 401(k) Match?," Issues in Brief ib2009-10-2, Center for Retirement Research, revised Feb 2010.
  7. Takeshi Yamaguchi, 2006. "Understanding Trading Behavior in 401(k) Plans," Working Papers wp125, University of Michigan, Michigan Retirement Research Center.

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