Participation in and Contributions to 401(k) Pension Plans: Evidence om Plan Data / Leslie E. Papke.

By:

Papke, Leslie E

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4199.Publication details: Cambridge, Mass. National Bureau of Economic Research 1992.Description: 1 online resource: illustrations (black and white)Subject(s):

J26 - Retirement • Retirement Policies

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: 401(k) plans differ from traditional employer-sponsored pension plans in that employees are permitted to make pre-tax contributions and the employer may match pan of the contribution. Since participation in these plans is voluntary, the sensitivity of participation and contributions to plan characteristics - notably the employer matching rate -- will play a critical role in retirement saving. Using plan level data from Form 5500s filed annually with the Internal Revenue Service, I find that there is potential for expanding retirement saving through 401(k) plans although there is evidence that the Tax Reform Act of 1986 reduced their attractiveness. Annual employee contributions were reduced by about 4 percent compared to the prior year after controlling for employer match rates. A simple model of employee contributions predicts that participation should increase with the match rate, and that, under reasonable assumptions, contributions will increase as well, but can eventually fall at higher match rates. I find evidence of both these effects. A .05 increase in the matching rate is associated with one to five percent increase in employee contributions.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w4199 (Browse shelf(Opens below))	Not For Loan

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October 1992.

401(k) plans differ from traditional employer-sponsored pension plans in that employees are permitted to make pre-tax contributions and the employer may match pan of the contribution. Since participation in these plans is voluntary, the sensitivity of participation and contributions to plan characteristics - notably the employer matching rate -- will play a critical role in retirement saving. Using plan level data from Form 5500s filed annually with the Internal Revenue Service, I find that there is potential for expanding retirement saving through 401(k) plans although there is evidence that the Tax Reform Act of 1986 reduced their attractiveness. Annual employee contributions were reduced by about 4 percent compared to the prior year after controlling for employer match rates. A simple model of employee contributions predicts that participation should increase with the match rate, and that, under reasonable assumptions, contributions will increase as well, but can eventually fall at higher match rates. I find evidence of both these effects. A .05 increase in the matching rate is associated with one to five percent increase in employee contributions.