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New Trends in Pension Benefit and Retirement Provisions

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  • Olivia S. Mitchell

Abstract

Private sector pension plans have undergone substantial change in form and structure in the United States over the last two decades. This paper explores and evaluates these changes using information on pension plan characteristics gathered by the U.S. Department of Labor (DOL) since 1980 in their periodic Employee Benefits Survey (EBS) of medium and large establishments. We also discuss how future data collection efforts could be improved to better measure key changes in the form and design of employer-sponsored pensions. Key findings are as follows: Many aspects of defined benefit plans changed over time. For example, vesting rules were loosened; plans eased access to normal retirement; and pension benefit formulas moved toward final rather than career earnings, with increased weight on straight-time pay. In addition, these plans became more integrated with social security; at the same time, the form of social security integration changed substantially. The evidence also indi6ate that defined benefit plan replacement rates fell over time and benefit caps limit years of service counted in the retirement formula. In addition, disability benefit provisions grew more stringent; and participants were increasingly permitted to take a lump sum from their defined benefit plan. Defined contribution plans also have evolved over time. Here, plan participants were granted greater access to diversified stock and bond funds, and fewer were permitted to invest in own-employer stock, common stock funds, and guaranteed insurance contracts. Participation and vesting rules appear most lenient for workers in 401(k) plans; generally employees must contribute a fraction of their pay to their plans rather than relying only on employer contributions; and employee access to pension fund assets fund assets prior to retirement is growing.

Suggested Citation

  • Olivia S. Mitchell, 2000. "New Trends in Pension Benefit and Retirement Provisions," Center for Financial Institutions Working Papers 00-06, Wharton School Center for Financial Institutions, University of Pennsylvania.
  • Handle: RePEc:wop:pennin:00-06
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    File URL: http://fic.wharton.upenn.edu/fic/papers/00/0006.pdf
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    References listed on IDEAS

    as
    1. Mitchell, Olivia S & Fields, Gary S, 1984. "The Economics of Retirement Behavior," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 84-105, January.
    2. Alan Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, "undated". "Retirement Measures in the Health and Retirement Survey," Pension Research Council Working Papers 94-2, Wharton School Pension Research Council, University of Pennsylvania.
    3. Deepak Lal (ed.), 1992. "Development Economics," Books, Edward Elgar Publishing, volume 0, number 566.
    4. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1993. "The Role of Pensions in the Labor Market," NBER Working Papers 4295, National Bureau of Economic Research, Inc.
    5. Rebecca A. Luzadis & Olivia S. Mitchell, 1991. "Explaining Pension Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 26(4), pages 679-703.
    6. Olivia S. Mitchell & Rebecca A. Luzadis, 1988. "Changes in Pension Incentives through Time," ILR Review, Cornell University, ILR School, vol. 42(1), pages 100-108, October.
    7. Alan L. Gustman & Olivia S. Mitchell, 1990. "Pensions and the U.S. Labor Market," NBER Working Papers 3331, National Bureau of Economic Research, Inc.
    8. Phillip B. Levine & Olivia S. Mitchell & James F. Moore, "undated". "Women on the Verge of Retirement: Predictors of Retiree Well-being," Pension Research Council Working Papers 97-2, Wharton School Pension Research Council, University of Pennsylvania.
    9. Olivia S. Mitchell, 1991. "Trends in Pension Benefit Formulas and Retirement Provisions," NBER Working Papers 3744, National Bureau of Economic Research, Inc.
    10. Phillip B. Levine & Olivia S. Mitchell & John W. Phillips, "undated". "Worklife Determinants of Retirement Income Differentials Between Men and Women," Pension Research Council Working Papers 99-19, Wharton School Pension Research Council, University of Pennsylvania.
    11. Olivia S. Mitchell & David McCarthy & Stanley C. Wisniewski & Paul Zorn, "undated". "Developments in State and Local Pension Plans," Pension Research Council Working Papers 99-4, Wharton School Pension Research Council, University of Pennsylvania.
    12. Alan L. Gustman & Olivia S. Mitchell & Andrew A. Samwick & Thomas L. Steinmeier, "undated". "Pension and Social Security Wealth in the Health and Retirement Study," Pension Research Council Working Papers 97-3, Wharton School Pension Research Council, University of Pennsylvania.
    13. Alan L. Gustman & Olivia S. Mitchell & Andrew A. Samwick & Thomas L. Steinmeier, "undated". "Evaluating Pension Entitlements," Pension Research Council Working Papers 98-20, Wharton School Pension Research Council, University of Pennsylvania.
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    Citations

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    Cited by:

    1. Olivia S. Mitchell & David McCarthy, 2002. "Annuities for an Ageing World," CeRP Working Papers 21, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    2. Kam Ki Tang & Jie Zhang, 2007. "Morbidity, Mortality, Health Expenditures and Annuitization," CESifo Working Paper Series 2086, CESifo Group Munich.
    3. Friedberg, Leora & webb, anthony, 2000. "The Impact of 401(k) Plans on Retirement," University of California at San Diego, Economics Working Paper Series qt2jr5w8b9, Department of Economics, UC San Diego.
    4. Olivia S. Mitchell, 2001. "Developments in Decumulation: The Role of Annuity Products in Financing Retirement," NBER Working Papers 8567, National Bureau of Economic Research, Inc.
    5. Gomes, Francisco J & Michaelides, Alexander & Polkovnichenko, Valery, 2005. "Wealth Accumulation and Portfolio Choice with Taxable and Tax-Deferred Accounts," CEPR Discussion Papers 4852, C.E.P.R. Discussion Papers.
    6. Queisser, Monika & Whitehouse, Edward, 2005. "Pensions at a glance: public policies across OECD countries," MPRA Paper 10907, University Library of Munich, Germany.
    7. Friedberg Leora & Owyang Michael T & Sinclair Tara M, 2006. "Searching For Better Prospects: Endogenizing Falling Job Tenure and Private Pension Coverage," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-42, August.
    8. 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.
    9. Love, David, 2006. "Buffer stock saving in retirement accounts," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1473-1492, October.
    10. Leora Friedberg & Michael T. Owyang, 2004. "Explaining the evolution of pension structure and job tenure," Working Papers 2002-022, Federal Reserve Bank of St. Louis.
    11. Bingley, Paul & Lanot, Gauthier, 2004. "Employer pay policies, public transfers and the retirement decisions of men and women in Denmark," European Economic Review, Elsevier, vol. 48(1), pages 181-200, February.
    12. Jeffrey R. Brown & Mark J. Warshawsky, 2001. "Longevity-Insured Retirement Distributions from Pension Plans: Market and Regulatory Issues," NBER Working Papers 8064, National Bureau of Economic Research, Inc.
    13. Alicia H. Munnell & Annika Sunden, 2003. "Household Borrowing From 401(k) Plans," Just the Facts jtf-1, Center for Retirement Research.
    14. Robert L. Clark & Olivia S. Mitchell, 2002. "Strengthening Employment-Based Pensions in Japan," NBER Working Papers 8891, National Bureau of Economic Research, Inc.
    15. David McCarthy, 2003. "A Lifecycle Analysis of Defined Benefit Pension Plans," Working Papers wp053, University of Michigan, Michigan Retirement Research Center.
    16. Whitehouse, Edward, 2001. "Pension systems in 15 countries compared: the value of entitlements," MPRA Paper 14751, University Library of Munich, Germany.
    17. Mejra Festić & Jože Mencinger, 2009. "The Perspective of Pension System Reforms in the New Member States," Prague Economic Papers, University of Economics, Prague, vol. 2009(4), pages 291-308.
    18. Constantijn W.A. Panis, 2003. "Annuities and Retirement Satisfaction," Working Papers 03-17, RAND Corporation.
    19. Charles Brown, 2010. "Post-Retirement Adjustments in Defined Benefit Pensions," Working Papers wp242, University of Michigan, Michigan Retirement Research Center.
    20. Francisco Gomes & Alexander Michaelides & Valery Polkovnichenko, 2009. "Optimal Savings with Taxable and Tax-Deferred Accounts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 718-735, October.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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