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E M P L O Y E E B E N E F I T S , C O M P E N S A T I O N
& P E N S I O N L A W
Vol. 6, No. 24: December 15, 2005
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Publisher: Employment, Labor, Compensation & Pension Law Journals
a division of
Social Science Electronic Publishing, Inc. (SSEP)
and Social Science Research Network (SSRN)
Editor: PAMELA PERUN
Urban Institute
Mailto:pamela@planetnow.com
Copyright: SSEP, Inc. 2005. All rights reserved.
Leading Social Science Research Delivered To Your Desktop
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Topic of This Issue:
Retirement Income
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T A B L E of C O N T E N T S
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NEW and FORTHCOMING ARTICLES
"Retirement Plan Participation: Survey of Income and Program
Participation (SIPP) Data"
EBRI Notes, Vol. 26, No. 9, September 2005
CRAIG COPELAND
Employee Benefit Research Institute (EBRI)
WORKING PAPERS
"Should You take a Lump-Sum or Annuitize? Results from Swiss
Pension Funds"
MONIKA BUETLER
Universität St. Gallen
"Pensions for an Aging Population"
PETER A. DIAMOND
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
"Role of 401(k) Accumulations in Providing Future Retirement
Income"
SARAH HOLDEN
Investment Company Institute
"Lipstick, Light Beer, and Backloaded Savings Accounts"
KAREN C. BURKE
University of San Diego School of Law
GRAYSON M.P. MCCOUCH
University of San Diego School of Law
"Resurrecting the Defined Benefit Pension Plan: A New
Perspective"
DOUGLAS C. FORE
Teachers Insurance and Annuity Association,
TIAA-CREF Institute
"Assessing the Maintenance of Savings Sufficiency Over the First
Decade of Retirement"
ROBERT H. HAVEMAN
University of Wisconsin - Madison
Department of Economics
National Bureau of Economic Research (NBER)
Institute for the Study of Labor (IZA)
CESifo (Center for Economic Studies and Ifo
Institute for Economic Research)
KAREN ANDERSON HOLDEN
University of Wisconsin - Madison
School of Human Ecology
BARBARA L. WOLFE
University of Wisconsin - Madison
College of Letters and Science
National Bureau of Economic Research (NBER)
Institute for the Study of Labor (IZA)
CESifo (Center for Economic Studies and Ifo
Institute for Economic Research)
ANDREI ROMANOV
University of Wisconsin - Madison
S S R N I N F O R M A T I O N
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EDITORIAL POLICIES
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Benefits, Compensation & Pension Law we do not referee working
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scholarly discourse.
N E W and F O R T H C O M I N G Articles
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"Retirement Plan Participation: Survey of Income and Program
Participation (SIPP) Data"
EBRI Notes, Vol. 26, No. 9, September 2005
BY: CRAIG COPELAND
Employee Benefit Research Institute (EBRI)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=838266
Contact: CRAIG COPELAND
Email: Mailto:COPELAND@EBRI.ORG
Postal: Employee Benefit Research Institute (EBRI)
Suite 600
2121 K Street, NW
Washington, DC 20037-1896 UNITED STATES
Phone: 202-775-6356
Fax: 202-775-6312
ABSTRACT:
This paper presents updated results from the latest Survey of
Income and Program Participation (SIPP) data on retirement plan
participation. SIPP is conducted by the U.S. Census Bureau to
examine Americans' participation in various government and
private-sector programs that relate to their income and
well-being. These latest data are from Topical Module 7 of the
2001 Panel fielded from January-April 2003. The SIPP data have
the advantage of providing relatively detailed information on
the retirement plans that workers participate in, but also have
the drawback of being fielded only once every five years. In
comparison, the Current Population Survey, also conducted by the
U.S. Census Bureau, provides overall participation levels of
workers on an annual basis but does not provide information on
the plan types in which the workers are participating.
This paper provides "top-line" results from the SIPP data on
retirement plan participation. A later paper will provide more
detailed breakdowns of the data for the results examined here.
The overall participation by all workers and nonagricultural
wage and salary workers are presented with breakdowns by age,
income, and industry of the worker and the worker's employer.
The next section investigates the plan type (defined benefit
versus defined contribution) that retirement participants regard
as their primary (most important) plan. The last section
examines participation in and contributions to salary reduction
plans (401(k)-type plans). The workers in this study include
those from both the private and the public sectors.
JEL Classification: J3, J33
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W O R K I N G P A P E R Abstracts
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"Should You take a Lump-Sum or Annuitize? Results from Swiss
Pension Funds"
BY: MONIKA BUETLER
Universität St. Gallen
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=834465
Date: October 2005
Contact: MONIKA BUETLER
Email: Mailto:Monika.Buetler@unisg.ch
Postal: Universität St. Gallen
CH-9000 St. Gallen, SWITZERLAND
ABSTRACT:
We use a unique dataset on individual retirement decisions in
Swiss pension funds to analyze the choice between an annuity and
a lump sum at retirement. Our analysis suggests the existence of
an acquiescence bias, meaning that a majority of retirees
chooses the standard option offered by the pensions fund or
suggested by common practice. Small levels of accumulated
pension capital are much more likely to be withdrawn as a lump
sum, suggesting a potential moral hazard behavior or a magnitude
effect. We hardly find evidence for adverse selection effects in
the data. Single men, for example, whose money's worth of an
annuity is considerably below the corresponding value of married
men, are not more likely to choose the capital option.
JEL Classification: D91, H55, J26
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"Pensions for an Aging Population"
BY: PETER A. DIAMOND
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=868540
Paper ID: MIT Department of Economics Working Paper No. 05-33
Date: December 1, 2005
Contact: PETER A. DIAMOND
Email: Mailto:pdiamond@mit.edu
Postal: Massachusetts Institute of Technology (MIT)
Department of Economics
Room E52-344
50 Memorial Drive
Cambridge, MA 02142 UNITED STATES
Phone: 617-253-3363
Fax: 617-253-7804
ABSTRACT:
After presenting the Gruber-Wise analysis showing a strong
effect on retirement of implicit taxes from pension rules, it is
shown that there is no effect of these implicit taxes on
unemployment. This supports the argument for avoiding high
implicit taxes on continued work. Also discussed are methods for
adjusting benefits and taxes for increases in life expectancy,
with particular attention to increasing the retirement age.
Calculations are presented showing the decreases in benefits for
an increase in the normal retirement age in the US and the years
of service for a full benefit in France.
JEL Classification: H550
______________________________
"Role of 401(k) Accumulations in Providing Future Retirement
Income"
BY: SARAH HOLDEN
Investment Company Institute
Paper ID: PRC Working Paper No. 2005-10
Date: 2005
Contact: SARAH HOLDEN
Email: Mailto:sholden@ici.org
Postal: Investment Company Institute
Research Department
1401 H Street, NW
Washington, DC 20005 UNITED STATES
Phone: (202) 326-5915
ABSTRACT:
Defined contribution (DC) plans are increasingly being offered
as the primary employer-sponsored pension, so it is of interest
to ask whether DC accumulations are likely to yield sufficient
income in retirement. This chapter uses the EBRI/ICI 401(k)
Accumulation Projection Model to explore alternative future
scenarios for retirees having had 401(k) plans available over a
full working career. We assess the impact of catch-up
contributions recently permitted by legislation; saving through
individual retirement accounts if the employer does not offer a
401(k) plan; and changing the retirement age.
______________________________
"Lipstick, Light Beer, and Backloaded Savings Accounts"
BY: KAREN C. BURKE
University of San Diego School of Law
GRAYSON M.P. MCCOUCH
University of San Diego School of Law
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=851507
Paper ID: San Diego Legal Studies Paper No. 07-24
Date: November 17, 2005
Contact: KAREN C. BURKE
Email: Mailto:burkek@sandiego.edu
Postal: University of San Diego School of Law
5998 Alcala Park
San Diego, CA 92110-2492 UNITED STATES
Phone: 619-260-7717
Fax: 619-260-2218
Co-Auth: GRAYSON M.P. MCCOUCH
Email: Mailto:gmccouch@sandiego.edu
Postal: University of San Diego School of Law
5998 Alcala Park
San Diego, CA 92110-2492 UNITED STATES
ABSTRACT:
The article addresses current proposals for expanding
tax-preferred individual savings accounts and their implications
for retirement security and tax policy. The authors argue that
the yield-exempt approach embraced by the Administration in its
proposals is likely to generate enormous long-term revenue
losses, exacerbate inequalities in income and wealth, and erode
broad-based coverage under employer-sponsored retirement plans.
In addition to these fiscal and distributional concerns, they
conclude that the proposals pose a serious obstacle to
fundamental tax reform.
______________________________
"Resurrecting the Defined Benefit Pension Plan: A New
Perspective"
BY: DOUGLAS C. FORE
Teachers Insurance and Annuity Association,
TIAA-CREF Institute
Paper ID: PRC Working Paper No. 2005-15
Date: 2005
Contact: DOUGLAS C. FORE
Email: Mailto:dfore@tiaa-cref.org
Postal: Teachers Insurance and Annuity Association, TIAA-CREF
Institute
730 Third Avenue
New York, NY 10017-3206 UNITED STATES
ABSTRACT:
Under the traditional approach to defined benefit plans,
well-intended disciplinary and regulatory regimes have sought to
restrict discretion, reduce uncertainty and risk, and protect
workers and employers. Nevertheless the discouraging state of US
defined benefit plans indicates that past efforts have gone
awry. This chapter suggests that a new approach to defined
benefit plans could resurrect the key elements required for
retirement income security, rather than pursuing piecemeal
reform.
______________________________
"Assessing the Maintenance of Savings Sufficiency Over the First
Decade of Retirement"
BY: ROBERT H. HAVEMAN
University of Wisconsin - Madison
Department of Economics
National Bureau of Economic Research (NBER)
Institute for the Study of Labor (IZA)
CESifo (Center for Economic Studies and Ifo
Institute for Economic Research)
KAREN ANDERSON HOLDEN
University of Wisconsin - Madison
School of Human Ecology
BARBARA L. WOLFE
University of Wisconsin - Madison
College of Letters and Science
National Bureau of Economic Research (NBER)
Institute for the Study of Labor (IZA)
CESifo (Center for Economic Studies and Ifo
Institute for Economic Research)
ANDREI ROMANOV
University of Wisconsin - Madison
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=844666
Paper ID: CESifo Working Paper Series No. 1567
Date: October 2005
Contact: ROBERT H. HAVEMAN
Email: Mailto:HAVEMAN@LAFOLLETTE.WISC.EDU
Postal: University of Wisconsin - Madison
Department of Economics
1180 Observatory Drive
Madison, WI 53706 UNITED STATES
Phone: 608-263-7398
Co-Auth: KAREN ANDERSON HOLDEN
Email: Mailto:HOLDEN@LAFOLLETTE.WISC.EDU
Postal: University of Wisconsin - Madison
School of Human Ecology
1225 Observatory Drive
Madison, WI 53706 UNITED STATES
Co-Auth: BARBARA L. WOLFE
Email: Mailto:wolfe@lafollette.wisc.edu
Postal: University of Wisconsin - Madison
College of Letters and Science
Madison, WI 53706 UNITED STATES
Co-Auth: ANDREI ROMANOV
Email: Mailto:romanov@lafollette.wisc.edu
Postal: University of Wisconsin - Madison
Madison, WI 53706 UNITED STATES
ABSTRACT:
The adequacy of retirement savings is central to the U.S. debate
over the effects of Social Security reform and pension changes
that would place greater responsibility on individuals for
accumulation of retirement resources. We contribute to this
discussion by examining the extent to which individuals maintain
initial levels of resources over the first decade of retirement.
We compare annuitized wealth, including Social Security and
pension wealth, to two consumption standards - a household's
preretirement earnings and the poverty threshold. We analyze the
relationship of individual characteristics to changes in this
ratio over time, including the effects of widowhood and
post-retirement work.