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Post-Retirement Adjustments in Defined Benefit Pensions

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  • Charles Brown

    (University of Michigan)

Abstract

Few private defined benefit pension plans commit to indexing benefits after a worker begins receiving them. Previous (now dated) research found that most plans did, nonetheless, make "voluntary" adjustments, which compensated for roughly 40 percent of the price increases experienced since retirement. In analyzing changes in pension benefits reported by HRS respondents between 1994 and 2008, I find annual increases that are about one third of the increase in the CPI. The increases are concentrated among respondents who report that their benefits are adjusted for inflation. They are larger for workers in public administration than in other industries; perhaps surprisingly, they are not larger in jobs covered by union contracts than those in the non-union sector. The HRS data also show that benefits paid out of defined contribution plans increased, again by roughly one third of the increase in consumer prices.

Suggested Citation

  • Charles Brown, 2010. "Post-Retirement Adjustments in Defined Benefit Pensions," Working Papers wp242, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp242
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    File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp242.pdf
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    1. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1986. "Postretirement Adjustments of Pension Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 118-137.
    2. Olivia S. Mitchell, "undated". "New Trends in Pension Benefit and Retirement Provisions," Pension Research Council Working Papers 2000-1, Wharton School Pension Research Council, University of Pennsylvania.
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