“At the Corner of Main and Wall Street: Family Pension Responses to Liquidity Change and Perceived Returns,” by Thomas Bridges and Frank Stafford (WP 2012-282, December 2012, .pdf format, 36p.). Note: Links to the abstract and full-text can be found at:
January 31, 2013
“Pensions: civil partnerships and same sex marriages,” by Djuna Thurley (SN03035, January 2013, .pdf format, 13p.).
January 28, 2013
“Minimum income standards and older pensioners’ needs,” by Yvette Hartfree, Donald Hirsch and Liz Sutton (January 2013, .pdf format, 41p.).
January 24, 2013
CAAR – US Social Security Administration, Research, Statistics, and Policy Analysis Periodical – January 24, 2013
International Update, January 2013 (January 2013, HTML and .pdf format, 3p.).
“Compensation Matters: The Case of Teachers,” by Alicia H. Munnell and Rebecca Cannon Fraenkel (SLP No. 28, January 2013, .pdf format, 14p.).
January 23, 2013
A. “Single-tier state pension,” by Djuna Thurley (SN06525, January 2013, .pdf format, 31p.).
B. “State Pension Reform,” by Djuna Thurley (SN05787, January 2013, .pdf format, 34p.).
CAAR – Institute for the Study of Labor (IZA) [University of Bonn, Germany] Working Paper – January 23, 2013
“Population Ageing and PAYG Pensions in the OLG Model,” by Giam Pietro Cipriani (Discussion Paper No. 7144, January 2013, .pdf format, 8p.). Note: Links to the abstract and full-text can be found at:
January 22, 2013
“Pension Costs on DOD Contracts: Additional Guidance Needed to Ensure Costs Are Consistent and Reasonable,” (GAO-13-158, January 2013, .pdf format, 62p.).
January 17, 2013
“Annuity and Lump-Sum Decisions in Defined Benefit Plans: The Role of Plan Rules,” by Sudipto Banerjee (Issue Brief No. 381, January 2013, .pdf format, 19p.).
“A Widening Gap in Cities: Shortfalls in Funding for Pensions and Retiree Health Care” (January 2013, .pdf format, 55p.).
January 14, 2013
“A simpler State Pension: A qualitative study to explore one option for State Pension reform,” by Andrew Thomas, Josh Hunt and Alice Coulter (Research Report No. 787, January 2013, .pdf format, 150p.).
January 7, 2013
Journal of Pension Economics and Finance (Vol. 12, No. 1, January 2013).
January 4, 2013
A. “Sticky Ages: Why Is Age 65 Still a Retirement Peak?” by Norma B. Coe, Mashfiqur Khan and Matthew S. Rutledge (WP No. 2013-2, January 2013, .pdf format, 29p.). Note: Links to the abstract and full-text can be found at:
B. “Accumulation and Decumulation Strategies in the Wake of the Financial Crisis,” by Richard W. Kopcke, Anthony Webb, and Josh Hurwitz (WP No. 2013-1, January 2013, .pdf format, 19p.). Note: Links to the abstract and full-text can be found at:
C. “Employee Mobility and Employer-Provided Retirement Plans,” by Gopi Shah Goda, Damon Jones and Colleen Flaherty Manchester (WP No. 2012-28, November 2012, .pdf format, 47p.). Note: Links to the abstract and full-text can be found at:
CAAR – Pensions Institute (Cass Business School, City University of London) [UK] Working Paper – January 4, 2013
“Cypriot Mortality and Pension Benefits,” by Andreas Milidonis (Discussion Paper PI-1209, December 2012, .pdf format, 12p.).
Mortality trends in Cyprus show a similar decreasing trend over the past thirty years to other developed countries. Using detailed, age specific data from 2003 and 2009, we estimate the impact of the change in Cypriot male and female mortality on a stylized life annuity framework for a Cypriot retiree. Based on these results and the general pension framework in Cyprus, we propose a few measures that can alleviate the burden of decreased mortality on pension obligations.
January 2, 2013
A. “The last private industry pension plans: a visual essay,” by William J. Wiatrowski (Monthly Labor Review, Vol. 135, No. 12, December 2012, .pdf and HTML format).
B. Beyond the Numbers (Vol. 1, No. 21, December 2012, .pdf and HTML format, 4p.). Note: The title of this issue is “Retirement costs for defined benefit plans higher than for defined contribution plans.”
CAAR – US Social Security Administration, Research, Statistics, and Policy Analysis Periodical – January 2, 2013
International Update, December 2012 (December 2012, HTML and .pdf format, 3p.).
“Quarterly Survey of Public Pensions: State & Local Government – 2012 Third Quarter,” (Microsoft Excel format).
“Pensions: Automatic enrolment – 2010 onwards ,” by Djuna Thurley (SN06417, December 2012, .pdf format, 26p.).
December 19, 2012
CAAR – US House Committee on Education and the Workforce, Subcommittee on Health, Employment, Labor, and Pensions Hearing Testimony – December 19, 2012
“Challenges Facing Multiemployer Pension Plans: Evaluating PBGC’s Insurance Program and Financial Outlook,” a hearing held December 19, 2012 (witness statements available in .pdf format, full hearing can be viewed in Flash Player format, running time 1 hour 25 minutes).
December 18, 2012
“Ottawa’s Pension Abyss: The Rapid Hidden Growth of Federal-Employee Retirement Liabilities,” by William B.P. Robson (No. 370, December 2012, .pdf format, 12p.).
December 17, 2012
“Is Information Overrated? Evidence from the Pension Domain,” by Henriette Prast, Federica Teppa and Anouk Smits (Working Paper No. 360, December 2012, .pdf format, 38p.). Note: Links to the abstract and full-text can be found at:
December 13, 2012
“Immigrating at older age often leads to lower pension” (Dec. 12, 2012). The press release links to a SS Report: “Integration – foreign born persons of retirement age” (December 2012, .pdf format, in Swedish, with a summary,table headings, and lists of tables, graphs, and terms in English).
“Restricting pension tax relief,” by Djuna Thurley (SN05901, December 2012, .pdf format, 38p.).
December 7, 2012
CAAR – Institute for Research on Public Policy (IRPP) [Montreal, Quebec Canada] Report – December 7, 2012
“The Federal Public Service Superannuation Plan: A Reform Agenda,” by Bob Baldwin (Study No. 37, December 2012, .pdf format, 40p.).
December 5, 2012
“Supplementary Pensions and the Income of Ireland’s Retirees,” by Sanna Nivakoski and Alan Barrett (December 2012, .pdf format, 30p.).
“Pension Reforms in Japan,” by Kenichiro Kashiwase, Masahiro Nozaki, and Kiichi Tokuoka (Working Paper No. 12/285, December 2012, .pdf format, 21p.). Note: Links to the abstract and full-text can be found at:
November 30, 2012
A. “Active vs. Passive Decisions and Crowdout in Retirement Savings Accounts: Evidence from Denmark,” by Raj Chetty, John N. Friedman, Soren Leth-Petersen, Torben Nielsen, and Tore Olsen (w18565, November 2012, .pdf format, 74p.).
Do retirement savings policies – such as tax subsidies or employer-provided pension plans – increase total saving for retirement or simply induce shifting across accounts? We revisit this classic question using 45 million observations on savings for the population of Denmark. We find that a policy’s impact on total savings depends critically on whether it changes savings rates by active or passive choice. Tax subsidies, which rely upon individuals to take an action to raise savings, have small impacts on total wealth. We estimate that each $1 of tax expenditure on subsidies increases total saving by 1 cent. In contrast, policies that raise savings automatically even if individuals take no action – such as employer-provided pensions or automatic contributions to retirement accounts – increase wealth accumulation substantially. Price subsidies only affect the behavior of active savers who respond to incentives, whereas automatic contributions increase savings of passive individuals who do not reoptimize. We estimate that 85% of individuals are passive savers. The 15% of active savers who respond to price subsidies do so primarily by shifting assets across accounts rather than reducing consumption. These individuals also o set changes in automatic contributions and have higher wealth-income ratios. We conclude that automatic contributions are more effective at increasing total retirement savings than price subsidies for three reasons: (1) subsidies induce relatively few individuals to respond, (2) they generate substantial crowdout conditional on response, and (3) they do not influence the savings behavior of passive individuals, who are least prepared for retirement.
B. “What Makes Annuitization More Appealing?” by John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian, and Stephen P. Zeldes (w18575, November 2012, .pdf format, 25p.).
We conduct and analyze two large surveys of hypothetical annuitization choices. We find that allowing individuals to annuitize a fraction of their wealth increases annuitization relative to a situation where annuitization is an ‘all or nothing’ decision. Very few respondents choose declining real payout streams over flat or increasing real payout streams of equivalent expected present value. Highlighting the effects of inflation increases demand for cost of living adjustments. Frames that focus on flexibility, control, and investment risk significantly reduce annuitization. A majority of respondents prefer to receive an extra ‘bonus’ payment during one month of the year that is funded by slightly lower payments in the remaining months. Concerns about later-life income, spending flexibility, and counterparty risk are the most important self-reported motives that influence the annuitization decision, whereas the desire to leave a bequest has little influence on this decision.
November 29, 2012
“Retirement Plan Assets,” by Barbara Butrica (November 2012, .pdf format, 2p.).
November 28, 2012
“Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2011,” by Craig Copeland (EBRI Issue Brief No. 378, November 2012, .pdf format, 44p.).
November 26, 2012
CAAR – Center for Economic Studies/Ifo Institute for Economic Research (CESifo) [Munich, Bavaria, Germany] Working Paper – November 26, 2012
“Portability of Pension, Health, and other Social Benefits: Facts, Concepts, and Issues,” by Robert Holzmann and Johannes Koettl (CESifo Working Paper No. 4002, November 2012, .pdf format, 40p.). Note: Links to the abstract and full-text can be found at:
A. “Pension Credit eligible non-recipients: Barriers to claiming,” by Lucy Radford, Lisa Taylor and Claire Wilkie (Research Report No. 819, November 2012, .pdf format, 22p.).
B. “Attitudes to Pensions: The 2012 survey,” by Pat MacLeod, Alice Fitzpatrick, Becky Hamlyn, Andrew Jones, Andrea Kinver and Leon Page (Research Report No. 813, November 2012, .pdf format, 144p.).
November 20, 2012
A. “Automatic Enrollment, Employee Compensation, and Retirement Security,” by Barbara A. Butrica and Nadia Karamcheva (WP No. 2012-25, November 2012, .pdf format, 41p.). Note: Links to the abstract and full-text can be found at:
B. “Holding Out or Opting Out? Deciding Between Retirement and Disability Applications in Recessions,” by Matthew S. Rutledge (WP No. 2012-26, November 2012, .pdf format, 36p.). Note: Links to the abstract and full-text can be found at:
“The Impact of Long Vesting Periods on State and Local Workers,” by Alicia H. Munnell, Jean-Pierre Aubry, Joshua Hurwitz and Laura Quinby (SLP No. 26, November 2012, .pdf format, 11p.).
November 19, 2012
“Public Plans Database.” “The Public Plans Database (PPD) contains comprehensive financial, governance, and plan design information for 126 state and local defined benefit plans. At the state level, the PPD covers 107 plans, which represent more than 90 percent of all state government pension assets and members. At the local level, the PPD covers 19 plans, which represent more than 20 percent of all local government pension assets and members. On a combined basis, the PPD represents more than 85 percent of total state and local government pension assets and members.”
“PBGC Annual Report, 2012,” (November 2012, .pdf format, 114p.).
“Mismeasurement of Pensions Before and After Retirement: The Mystery of the Disappearing Pensions with Implications for the Importance of Social Security as a Source of Retirement Support,” by Alan L. Gustman, Thomas L. Steinmeier, and Nahid Tabatabai (w18542, November 2012, .pdf format, 36p.).
A review of the literature suggests that when pension values are measured by the wealth equivalent of promised DB pension benefits and DC balances for those approaching retirement, pensions account for more support in retirement than is suggested when their contribution is measured by incomes received directly from pension plans by those who have already retired. Estimates from the Health and Retirement Study (HRS) for respondents in their early fifties suggest that pension wealth is about 86 percent as valuable as Social Security wealth. In data from the Current Population Survey (CPS), for members of the same cohort, measured when they are 65 to 69, pension incomes are about 56 percent as valuable as incomes from Social Security. Our empirical analysis uses data from the Health and Retirement Study to examine the reasons for these differences in the contributions of pensions as measured in income and wealth data.
A number of factors cause the contribution of pensions to be understated in retirement income data, especially data from the CPS. One factor is a difference in methodology between surveys affecting what is included in pension income, especially in the CPS, which ignores irregular payments from pensions. In CPS data on incomes of those ages 64 to 69 in 2006, pension values are 59 percent of the value of Social Security. For the same cohort, in HRS data, the pension value is 67 percent of the value of Social Security benefits.
Some pension wealth ‘disappears’ at retirement because respondents change their pension into other forms that are not counted as pension income in surveys of income. Altogether, 16 percent of pension wealth is transformed into some other form at the time of disposition. For those who had a defined benefit pension just before termination, the dominant plan type for current retirees, at termination 12 percent of the benefit was transformed into a state that would not count as pension income after retirement.
For those who receive benefits soon after termination, there is a 3.5 percent reduction in DB pension value at termination compared to the year before termination. One reason may be the form of annuitization that is chosen.
A series of caveats notwithstanding, the bottom line is that CPS data on pension incomes received in retirement understates the full contribution pensions make to supporting retirees.
November 16, 2012
“2011 Annual Survey of Public Pensions: State & Local Data,” (November 2012, Excel, ASCII text, and .pdf format).
Related press release:
November 12, 2012
A. “Pension Costs and Retirement Decisions in Plans that Combine DB and DC Elements: Evidence from Oregon,” by John Chalmers, Woodrow T. Johnson and Jonathan Reuter (w18517, November 2012, .pdf format, 50p.).
The Oregon Public Employees Retirement System (PERS) is a hybrid pension plan that provides employees the security of a defined benefit (DB) pension plus the option to receive instead retirement benefits based on a defined contribution-style (DC) retirement account. We use PERS administrative data for 1990 to 2003 to study the effect of this hybrid design on employers’ costs and employees’ retirement-timing decisions. We have four findings. First, the option built into PERS is costly for employers to provide. Ex post, average retirement benefits are 49% higher in the hybrid plan than they would have been in a traditional DB plan. For the typical retiree, simulations show that our ex post estimate lies between the 50th and 75th percentiles of the ex ante distribution. Second, the hybrid plan distorts employees’ retirement timing decisions relative to a traditional DB plan. Looking across benefit formulas, we find that as an employee’s DC benefit increases above her DB benefit, so does the probability that she retires before the normal retirement age. Third, we find that retirement timing decisions respond to two sources of exogenous variation in the level of the DC benefit. Finally, we find evidence of peer effects in that employees respond more strongly to their own retirement incentives when more of their coworkers face similar incentives. The retirement waves that result from employees seeking to avoid declines in pension benefits are likely to impose significant administrative costs on employers.
B. “Health Insurance Reform: The Impact of a Medicare Buy-In,” by Gary D. Hansen, Minchung Hsu and Junsang Lee (w18529, November 2012, .pdf format, 32p.).
The steady state general equilibrium and welfare consequences of health insurance reform are evaluated in a calibrated life-cycle economy with incomplete markets and endogenous labor supply. Individuals face uncertainty each period about their future health status, medical expenditures, labor productivity, access to employer provided group health insurance, and the length of their life. In this environment, incomplete markets and adverse selection, which restricts the type of insurance contracts available in equilibrium, creates a potential role for health insurance reform. In particular, we consider a policy reform that would allow older workers (aged 55-64) to purchase insurance similar to Medicare coverage. We find that adverse selection eliminates any market for a Medicare buy-in if it is offered as an unsubsidized option to individual private health insurance. Hence, we compare the equilibrium properties of the current insurance system with those that obtain with an optional buy-in subsidized by the government, as well as with several types of health insurance mandates.
November 9, 2012
“Matching contributions for pensions,” by Richard Hinz, Robert Holzmann, David Tuesta, Noriyuki Takayama (No. 73513, Novmeber 2012, .pdf and ASCII text format, 356p.).
November 8, 2012
“Pension Benefit Guaranty Corporation: Redesigned Premium Structure Could Better Align Rates with Risk from Plan Sponsors,” (GAO-13-58. November 2012, .pdf format, 95p.).
Pension Markets in Focus (No. 9, September 2012, .pdf format, 28p.).
A. “The Role of Funded Pensions in Retirement Income Systems: Issues for the Russian Federation,” by Juan Yermo (OECD Working Papers on Insurance and Private Pensions No. 27, October 2012, .pdf format, 37p.). Note: Links to the abstract and full-text can be found at:
B. “Communicating Pension Risk to DC Plan Members: The Chilean Case of a Pension Risk Simulator,” by Pablo Antolin and Olga Fuentes (OECD Working Papers on Insurance and Private Pensions No. 28, October 2012, .pdf format, 25p.). Note: Links to the abstract and full-text can be found at:
November 6, 2012
“Who’s Afraid of Good Governance? State Fiscal Crises, Public Pension Underfunding, and the Resistance to Governance Reform,” by Thomas J. Fitzpatrick IV and Amy B. Monahan (WP 12-23, November 2012, .pdf format, 50p.).
This article presents the results of a qualitative study of the funding and governance provisions of 12 public pension plans that are a mix of state and local plans of various funding levels. We find that none of the plans in our study satisfy the best practices that have been established by expert panels, but also that the strength of a plan’s governance provisions does not appear correlated with the plan’s financial health. Our most important finding is that, regardless of the content of a plan’s governance provisions, such provisions are almost never effectively enforced. This lack of enforcement, we theorize, has a significant, detrimental impact on plan funding and governance. If neither plan participants nor state taxpayers are able to effectively monitor and challenge a state’s inadequate funding or improper investment decisions, public plans are very likely to remain underfunded. We conclude by offering several possible reform options to address the monitoring and enforcement problems made clear by our study: automatic benefit haircuts, automatic tax increases, a low-risk investment requirement, and market monitoring through the use of modified pension obligation bonds.
November 1, 2012
“Federal Employee Pension Reforms: First Steps – on a Much Longer Journey,” by William B. P. Robson and Alexandre Laurin (Brief No. 140, November 2012, .pdf format, 7p.).
October 31, 2012
“Social Security Statistics 2006-2011,” (October 2012, .pdf format, 24p.).
CAAR – Institute for the Study of Labor (IZA) [University of Bonn, Germany] Working Papers – October 31, 2012
A. “Negative Reciprocity and Retrenched Pension Rights,” by Raymond Montizaan, Frank Corvers, Andries de Grip, and Thomas Dohmen (Disucssion Paper No. 6955, October 2012, .pdf format, 37p.). Note: Links to the abstract and full-text can be found at:
B. “Does Schooling Improve Cognitive Functioning at Older Ages?” by Nicole Schneeweis, Vegard Skirbekk, and Rudolf Winter-Ebmer (Disucssion Paper No. 6958, October 2012, .pdf format, 32p.). Note: Links to the abstract and full-text can be found at:
October 30, 2012
“Reducing Disparities and Enhancing Sustainability in Asian Pension Systems,” by Yves Guerard, Mukul Asher, Donghyun Park, and Gemma B. Estrada (Working Paper No. 313, October 2012, .pdf format, 15p.). Note: Links to the abstract and full-text can be found at:
“Increasing Life Expectancy and Pay-As-You-Go Pension Systems,” by Markus Knell (Working Paper 179, August 2012, .pdf format, 36p.). Note: Links to the abstract and full-text can be found at:
October 29, 2012
A. “Defined Benefit Pension Plan Distribution Decisions by Public Sector Employees,” by Robert L. Clark, Melinda S. Morrill, David Vanderweide (w18488, October 2012, .pdf format, 57p.).
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.
B. “The Revenue Demands of Public Employee Pension Promises,” by Robert Novy-Marx and Joshua D. Rauh (w18489, October 2012, .pdf format, 64p.).
We calculate increases in contributions required to achieve full funding of state and local pension systems in the U.S. over 30 years. Without policy changes, contributions would have to increase by 2.5 times, reaching 14.1% of the total own-revenue generated by state and local governments. This represents a tax increase of $1,385 per household per year, around half of which goes to pay down legacy liabilities while half funds the cost of new promises. We examine sensitivity to asset return assumptions, wage correlations, the treatment of workers not currently in Social Security, and endogenous geographical shifts in the tax base.
C. “Linking Benefits to Investment Performance in US Public Pension Systems by Robert Novy-Marx, Joshua D. Rauh” (w18489, October 2012, .pdf format, 44p.).
This paper calculates the effect that introducing risk-sharing during either retirement or the working life would have on public sector pension liabilities. We begin by considering the introduction of a variable annuity for the retirement phase, modeled on the Wisconsin Retirement System, in which positive benefit adjustments are granted only if asset returns surpass 5% but benefits cannot fall below their initial levels. This change would reduce unfunded accrued liabilities by around 25%, and would lower the annual contribution increases required to target full funding in 30 years by 11%. If there is no minimum benefit guarantee, the impact of introducing variable annuities is substantially larger: the unfunded liability would fall by over half and required annual contribution increases would fall by 44%. Alternative measures that have similar effects on costs include increasing employee contributions by 10.3% of pay while keeping benefits unchanged; or giving employees a collective DC plan with an employer contribution of 10% of pay for future service. We discuss these results in the context of models of lifecycle portfolio choice, which suggest that employees should generally prefer to take risk earlier in their lives rather than later.