Defined benefit pension plan distribution decisions by public sector employees

Clark, Robert L.; Morrill, Melinda Sandler; Vanderweide, David

doi:10.1016/j.jpubeco.2013.05.005

Cited by 22 publications

(16 citation statements)

References 36 publications

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“…Pension benefits represent an especially important component of overall compensation in the public sector (Lewin et al , 2012), and DB pension structures have long been thought to be an important tool to recruit and retain high-quality public sector employees (Dorsey, 1995). However, recent theoretical research questions whether this compensation structure is in fact efficient or simply reflects the political process that determines public sector pay (Glaeser and Ponzetto, 2014). To our knowledge, there is only one published study that incorporates a measure of employee productivity in a choice model to see whether a DB or DC system may be more desirable to more effective workers.…”

mentioning

confidence: 99%

Which plan to choose? The determinants of pension system choice for public school teachers

Goldhaber¹,

Grout²

2014

Journal of Pension Economics and Finance

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This paper examines a natural experiment in which Washington State teachers were offered the opportunity to choose between enrolling in a traditional defined benefit (DB) plan and a hybrid plan with DB and defined contribution (DC) components. We find plan preference is weakly related to estimates of the relative financial benefits of being in either the DB or hybrid system and strongly related to teacher age. Importantly, we also find that the majority of teachers prefer the hybrid plan, and that teachers opting into the hybrid plan tend to be more effective based on student output measures of teacher productivity. These results suggest that policy shifts toward pension systems that include DC options do not necessarily make teaching a less desirable profession, particularly for the most productive employees.

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confidence: 99%

Which plan to choose? The determinants of pension system choice for public school teachers

Goldhaber¹,

Grout²

2014

Journal of Pension Economics and Finance

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“…Brown and Weisbenner (2014) find that people often make decisions based on incorrect information about their retirement plan. Clark, Morrill, and Vanderweide (2014) show that not understanding benefits is more prevalent among employees with shorter tenures, who also appear less likely to fully use retirement savings programs at work. This evidence is consistent with the idea that, in the absence of information, people may fail to optimally form financial plans, including utilizing appropriate employer-based retirement and related benefits.…”

Section: The Role Of Informationmentioning

confidence: 92%

The Role of Information on Retirement Planning: Evidence From a Field Study

Collins

Urban

2016

Economic Inquiry

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Many households neglect the pivotal task of planning for retirement. Proposals to stimulate employees to save for retirement in the workplace include tax subsidies, which are costly, and using automatic defaults, which may not complement the heterogeneous preferences of savers. This randomized field study shows that an information‐based intervention increases reported retirement plan participation, emergency savings, and using a budget. Employees offered access to education increased actual retirement deferrals by $26 per month. These results suggest that retirement education programs may be an effective strategy to increase retirement planning and saving behavior. (JEL J26, D14, D91)

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“…Plan actuaries set the terms of all annuity options so that they are considered present value neutral to the system 5 . There is also an option to take a lump sum withdrawal, but most benefit claimants with long careers find that the present value of the annuity greatly exceeds the lump sum (Clark et al ., 2014).…”

Section: Background On North Carolina Retirement Plans and Annuity Opmentioning

confidence: 99%

Navigating complex financial decisions at retirement: evidence from annuity choices in public sector pensions

Clark

Hammond

Vanderweide³

2019

Journal of Pension Economics and Finance

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Choices regarding the disposition of wealth at retirement can have substantial implications for retirement income security. We analyze the factors determining annuity payout option choices within the context of a public sector defined pension plan with no default annuity option. Using combined administrative records and survey data, we explore the role of individual and household characteristics as well as risk preferences, time preferences, and financial literacy. We also document retiree well-being and satisfaction with retirement decision making. The evidence is consistent with predictions over which households might benefit most from each annuity option. Comparing retirees who chose different types of annuities, we find that these groups of retirees report very different levels of well-being in retirement. All retirees report lower levels of retirement income security over time, with strong differences among those who chose different types of annuities.

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Defined benefit pension plan distribution decisions by public sector employees

Cited by 22 publications

References 36 publications

Which plan to choose? The determinants of pension system choice for public school teachers

Which plan to choose? The determinants of pension system choice for public school teachers

The Role of Information on Retirement Planning: Evidence From a Field Study

Navigating complex financial decisions at retirement: evidence from annuity choices in public sector pensions

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