Employee Decisions with Respect to 401(k) Plans: Evidence From Individual-Level Data
401(k) plans have been the most rapidly growing type of employer- provided pension plan during the last decade. This paper utilizes employee-level data from the 401(k) plan at a medium-sized U.S. manufacturing firm to analyze the participation and contribution decisions of workers eligible for this plan. Our analysis reveals two important features of 401(k) participant behavior. First, contribution decisions of eligible employees are relatively insensitive to the rate of employer matching on worker contributions. Most employees maintain the same participation status and contribution rate year after year, despite substantial changes in the employer's match rate at the firm we study. This suggests that employer matching may not be a critical factor in explaining the growth of 401(k) plans. Second, we find that institutional constraints on contributions, imposed either by the employer or by the IRS, are an extremely important influence on contributor behavior. About three quarters of eligible employees contributed at rates that place them at one of the 'corners' or 'kinks' in the 401(k) opportunity set. This finding must be recognized in any analysis of how changes in 401(k) plan provisions are likely to affect contribution levels.
|Date of creation:||Feb 1994|
|Publication status:||published as in Olivia Mitchell and Syllvester Schieber, eds., Living with Defined Contribution Pensions: Remaking Responsibility for Retirement. (University of Pennsylvania Press, 1997).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James H. Stock & David A. Wise, 1990.
"The Pension Inducement to Retire: An Option Value Analysis,"
NBER Chapters,in: Issues in the Economics of Aging, pages 205-230
National Bureau of Economic Research, Inc.
- James H. Stock & David A. Wise, 1988. "The Pension Inducement to Retire: An Option Value Analysis," NBER Working Papers 2660, National Bureau of Economic Research, Inc.
- Hausman, Jerry A., 1985. "Taxes and labor supply," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 4, pages 213-263 Elsevier.
- Poterba, James M. & Venti, Steven F. & Wise, David A., 1995.
"Do 401(k) contributions crowd out other personal saving?,"
Journal of Public Economics,
Elsevier, vol. 58(1), pages 1-32, September.
- James M. Poterba & Steven F. Venti & David A. Wise, 1993. "Do 401(k) Contributions Crowd Out Other Persoanl Saving?," NBER Working Papers 4391, National Bureau of Economic Research, Inc.
- James M. Poterba & Steven F. Venti, 1994.
"401(k) Plans and Tax-Deferred Saving,"
NBER Chapters,in: Studies in the Economics of Aging, pages 105-142
National Bureau of Economic Research, Inc.
- Poterba, J.M. & Venti, S.F. & Wise, D.A., 1992. "401(k) Plans and Tax-Deferred Savings," Working papers 92-14, Massachusetts Institute of Technology (MIT), Department of Economics.
- James M. Poterba & Steven F. Venti & David A. Wise, 1992. "401(k) Plans and Tax-Deferred Saving," NBER Working Papers 4181, National Bureau of Economic Research, Inc.
- Leslie E. Papke, 1995.
"Participation in and Contributions to 401(k) Pension Plans: Evidence from Plan Data,"
Journal of Human Resources,
University of Wisconsin Press, vol. 30(2), pages 311-325.
- 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.
- Laurence J. Kotlikoff & David A. Wise, 1987. "The Incentive Effects of Private Pension Plans," NBER Chapters,in: Issues in Pension Economics, pages 283-340 National Bureau of Economic Research, Inc.
- Zvi Bodie & John B. Shoven & David A. Wise, 1987. "Issues in Pension Economics," NBER Books, National Bureau of Economic Research, Inc, number bodi87-1, December.
- Moffitt, Robert, 1990. "The Econometrics of Kinked Budget Constraints," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 119-139, Spring.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4635. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.