Defined Benefit Pension Plan Distribution Decisions by Public Sector Employees / Robert L. Clark, Melinda S. Morrill, David Vanderweide.

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Clark, Robert L

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w18488.Publication details: Cambridge, Mass. National Bureau of Economic Research 2012.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Studies examining pension distribution choices have found that the tendency of private-sector workers is to select lump sum distributions instead of life annuities. In the public sector, defined benefit pensions usually offer lump sum distributions equal to employee contributions, not the present value of the annuity. Using administrative data from the North Carolina state and local government retirement systems, we find that over two-thirds of public sector workers under age 50 separating prior to retirement from public plans in North Carolina left their accounts open and did not request a cash distribution from the pension system within one year of separation. Furthermore, the evidence suggests many separating workers, particularly those with short tenure, may be forgoing important benefits due to lack of knowledge, understanding, or accessibility of benefits. In contrast to prior research in the private sector, we find no evidence of a bias toward cash distributions for public employees in North Carolina.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w18488 (Browse shelf(Opens below))	Not For Loan

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October 2012.

Studies examining pension distribution choices have found that the tendency of private-sector workers is to select lump sum distributions instead of life annuities. In the public sector, defined benefit pensions usually offer lump sum distributions equal to employee contributions, not the present value of the annuity. Using administrative data from the North Carolina state and local government retirement systems, we find that over two-thirds of public sector workers under age 50 separating prior to retirement from public plans in North Carolina left their accounts open and did not request a cash distribution from the pension system within one year of separation. Furthermore, the evidence suggests many separating workers, particularly those with short tenure, may be forgoing important benefits due to lack of knowledge, understanding, or accessibility of benefits. In contrast to prior research in the private sector, we find no evidence of a bias toward cash distributions for public employees in North Carolina.