"Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets" 

NBER Working Paper No. w15789

JAMES M. POTERBA, Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER)
Email: poterba@mit.edu
STEVEN F. VENTI, Dartmouth College - Department of Economics, National Bureau of Economic Research (NBER)
Email: Steven.F.Venti@dartmouth.edu
DAVID A. WISE, National Bureau of Economic Research (NBER), Harvard University - John F. Kennedy School of Government
Email: dwise@nber.org

We consider the evolution of assets after retirement. We ask whether total assets -- including housing equity, personal retirement accounts, and other financial assets -- tend to be husbanded for a rainy day and drawn down primarily at the time of precipitating shocks, or whether they are drawn down throughout the retirement period. We focus on the relationships between family status transitions, latent health status, and the evolution of assets. Our analysis is based primarily on longitudinal data from the HRS and AHEAD cohorts of the Health and Retirement Study. We find that the evolution of assets is strongly related to family status transitions. For both single individuals and married couples who do not experience a death or divorce, total assets increase well into old age. In contrast, individuals in married couples that experience a family status transition, either a death or a divorce, exhibit much slower asset growth and often experience a large decline in asset values at the time of the transition. In addition, the level and evolution of assets is very strongly related to health, measured by a latent health index. For example, for continuing two-person HRS households between the ages of 56 and 61 in 1992 the ratio of assets of households in the top health quintile to the assets of those in the bottom quintile was 1.7 in 1992. It had increased to 2.2 by the end of 2006.

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"Participation and Contributions in Tax-Deferred Retirement Accounts: Evidence from Social Security Records" 

Michigan Retirement Research Center Research Paper No. 2009-219

MARJORIE HONIG, Hunter College, City University of New York - Department of Economics
Email: Marjorie.Honig@hunter.cuny.edu
IRENA DUSHI, Social Security Administration
Email: irenad1@gmail.com

Social Security Administration W-2 records contain employee annual tax-deferred contributions for 1990-2003 and sufficient information to calculate tax-deferred contributions for 1984-1989. We use this information to compare tax-deferred contribution profiles of three cohorts of respondents in the Health and Retirement Study to determine whether younger cohorts saved relatively more at the same stage of the life cycle than had older cohorts. We find that participation in tax-deferred retirement plans increased substantially for all cohorts from 1984 to 2003, and that respondents in more recent cohorts were more likely to participate in such plans than respondents of the same ages in the earliest cohort. Their contributions as a percent of earnings were not significantly larger than those of the earliest cohort, however. Despite the increased availability of these employer-provided plans throughout this period, participation rates and contribution amounts remained low among respondents in the lower half of the earnings distribution.

"Public Pension Plan Reform: The Legal Framework" 

Education, Finance & Policy, Vol. 5, 2010
Minnesota Legal Studies Research No. 10-13

AMY MONAHAN, University of Minnesota - Twin Cities - School of Law
Email: monahana@missouri.edu

There is significant interest in reforming retirement plans for public school employees, particularly in light of current market conditions. This paper presents an overview of the various types of state regulation of public pension plans that affect possibilities for reform. Nearly all of the various approaches to public pension plan protection taken by the states have significant flaws. These flaws include a lack of clarity regarding what plan changes the relevant legal standard will allow, combined with either too much or too little protection for plan participants. This paper argues that states would be well served to adopt a contractual approach to public pension benefits, but to limit that contractual protection to accrued benefits. This approach is clear, protects legitimate participant interests, and preserves an employer’s ability to respond to changing economic conditions.

"Choice Architecture" 

RICHARD H. THALER, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)
Email: richard.thaler@gsb.uchicago.edu
CASS R. SUNSTEIN, Harvard University - Harvard Law School
Email: csunstei@law.harvard.edu
JOHN P. BALZ, University of Chicago - Political Science Department
Email: jpbalz@uchicago.edu

Decision makers do not make choices in a vacuum. They make them in an environment where many features, noticed and unnoticed, can influence their decisions. The person who creates that environment is, in our terminology, a choice architect. In this paper we analyze some of the tools that are available to choice architects. Our goal is to show how choice architecture can be used to help nudge people to make better choices (as judged by themselves) without forcing certain outcomes upon anyone, a philosophy we call libertarian paternalism. The tools we highlight are: defaults, expecting error, understanding mappings, giving feedback, structuring complex choices, and creating incentives.

"Release Us from Confusion Over Erisa Fiduciary Claims" 

Pensions & Benefits Daily, Vol. 40, March 16, 2010

ANDREW L. ORINGER, Hofstra University - School of Law, Ropes & Gray LLP
Email: andrew.oringer@hofstra.edu
JOSHUA A. LICHTENSTEIN, Ropes & Gray LLP
ADAM E. STELLA, Ropes & Gray LLP

Class-action litigation has found its way to ERISA in quite a high-profile fashion. In so called “stock-drop” and “indirect-fee” cases, among others, plan participants acting as class representatives have asserted on behalf of a broader group of participants that plan fiduciaries have breached their duties to the detriment of the plan. But what if the putative class representatives have generally released claims against their employer, and a host of other parties connected with the employer? Would they be barred from bringing their claims? A quick review of the cases might lead one to conclude that releases are not effective to forestall a participant’s effort to bring a class action. In case after case, courts conclude that general releases do not bar the bringing of ERISA fiduciary claims, and in a number of cases plaintiffs have been permitted to continue with claims notwithstanding their having given general releases. But maybe the courts have been saying that there is something about the particular releases on which they are ruling that renders them ineffective to forestall the fiduciary claims at issue. As illustrated by the reasoning in the December 2009 Schering-Plough case, maybe a particular release or covenant not to sue could, depending on how it is drafted, indeed be sufficient to act as a defense to a class representative’s purported claim.

"Shared Capitalism and Employee Ownership: The Scholarly Agenda" 

Donald H Jones Center for Entrepreneurship Research Paper No. 10-02

MARY ANN BEYSTER, Foundation for Enterprise Development
Email: mabeyster@fed.org
MAUREEN A. SCULLY, University of Massachusetts at Boston - College of Management
Email: Maureen.Scully@umb.edu
JUSTIN GOLDBACH, The Aspen Institute's Business and Society Program
Email: jg811@nyu.edu
JOSEPH BLASI, Rutgers School of Management and Labor Relations - New Brunswick
Email: jrbru@hotmail.com

The ideas of employee ownership and various forms of profit sharing in corporations have been around for a long time. The shorthand proposition is: if employees feel valued, they create value. More precisely, if they are owners and if they are satisfied by their connection to and stake in a greater whole, then they may, in turn, boost productivity.

Employee ownership is gaining new attention in academia with the emergence of many new and young scholars in the field, partly as a result of fellowship programs to support them. Several current issues make now a good time to have a fresh scholarly discussion about employee ownership, to see what ideas it might hold for rethinking the governance structures of business. This discussion is neither a review of the research literature nor a verbatim summary of the symposium, but rather an overview of the main issues discussed there. Some broad implications for both future research and future policy are noted.

-The current state of pensions and investments in the financial markets is causing a wide range of people to reconsider how to accrue and hold onto assets that reflect their years of hard work.

While employee-owners also lost on the value of their investments during the recent economic collapse, how can employee ownership play a responsible role in retirement savings?

-Innovations in clean technology, biopharmaceuticals, and other emerging technologies represent a new paradigm of economic growth. New ventures in these areas will rely on talented employees contributing their effort in risky start-up enterprises.

To what extent can broad-based employee ownership create incentives for groups of innovators and supplement venture capital for new enterprises while supporting a more sustainable pipeline of innovations?

-The widening compensation gap between top executives and other workers is causing politicians, shareholders, and employees to reconsider who builds the assets of an organization and who should share in them.

How can employee ownership provide new models for corporate governance and wealth sharing?

These are just some of the forces and questions that made this symposium on employee ownership timely. Interestingly, three months after the symposium, in October of 2009, Elinor Ostrom won the Nobel Prize for Economics, for her work on the role of the commons in economic governance. She showed how collective ownership can be viable, despite skepticism from mainstream economic theorists that free-rider hazards will hamper it.

Altogether, this is a propitious time to take a critical look at the research issues and realities of employee ownership. A group of researchers from a range of disciplines, many having recently incorporated aspects of ownership into their research, has a series of studies on employee ownership well underway. Their work examines the varieties and extent of employee ownership; the conditions under which it will succeed or fail; the mechanisms by which it can generate value for individuals, teams, firms, communities, and society; and the implications for policy.

"The Home, Pension Savings, and Risk Aversion: Intentions of the Defined Contribution Pension Plan Participants of a London-Based Investment Bank at the Peak of the Bubble" 

GORDON L. CLARK, Oxford University Center for the Environment
Email: gordon.clark@ouce.ox.ac.uk
STEPHEN ALMOND, affiliation not provided to SSRN
Email: stephen.almond@worc.ox.ac.uk
KENDRA STRAUSS, affiliation not provided to SSRN
Email: kendra.strauss@geog.ox.ac.uk

In the lead-up to the peak of the financial bubble (and before the onset of the global financial crisis), UK newspapers regularly touted property as a ready-made alternative to private pensions. In this paper we explore the importance of the property in which respondents live for their retirement savings strategies. Based upon a unique survey of over 2,400 participants in the defined contribution pension scheme of a London-based international bank, we assess the statistical significance of respondents’ socio-economic status and risk preference in predicting the significance or otherwise of their home for retirement saving. Relatively few respondents indicated that they were likely to rely on their hom. Those that indicated reliance were relatively older, higher paid, and married employees. The paper concludes with implications for understanding the connection between savings behaviour and housing before and after the global financial crisis.