Pension reform and return-to-work policies

AbstractFor many people, working after beginning retirement benefit collection is a way to enhance financial security by increasing income. Existing research has shown that retirees are sensitive to the Social Security earnings test, which restricts the amount of earnings some beneficiaries can receive. However, little is known about the effects of other types of policies on post-retirement employment. Instead of restricting earnings, many public pension plans restrict the number of hours beneficiaries can work. I use return-to-work rules limiting the number of hours of employment in a state's public pension plan and administrative data on employment and retirement to determine the rules’ effects on retirement decisions and post-retirement labor supply. I find that the increases in the maximum number of hours of post-retirement employment lead to no change in retirement benefit collection and to increases in part-time work among retirees. As such, these policies appear to be binding on the labor supply decisions of some employees. These results are relevant for designing policies aimed at extending work-lives or improving the health of pension systems.

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Risk-Taking Behavior Of Public Pension Plans Before And After The Financial Crisis Of 2008

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v30i2.8425 ◽

2014 ◽

Vol 30 (2) ◽

pp. 557

Author(s):

Youngkyun Park

Keyword(s):

Risk Management ◽

Financial Crisis ◽

Risk Taking ◽

Pension Plan ◽

Pension Plans ◽

Public Pension ◽

Risk Transfer ◽

Risk Taking Behavior ◽

Financial Crisis Of 2008 ◽

Public Pension Plans

This paper investigates whether public pension plans risk-taking behavior has changed after the recent financial crisis of 2008 by testing two contrasting hypotheses on pension funding: risk transfer and risk management hypotheses. In managing pension assets, public pension plan sponsors may have an incentive for risk transfer because underfunded pension obligations can be shifted to future taxpayers (risk transfer hypothesis). Facing a budget constraint, they may also have an incentive for risk management because they would prefer to stabilize their contributions (risk management hypothesis). Using a sample of 126 public pension plans for the period of 2001?2011, this paper finds that public pension plans risk-taking behavior has changed after the financial crisis of 2008. Before the financial crisis, public pension plan sponsors invest more in equities when a large required contribution is expected, which is consistent with the risk transfer hypothesis. After the financial crisis, however, the plan sponsors invest less in equities when a large required contribution is expected, which is consistent with the risk management hypothesis. The findings suggest that public pension plans risk-taking behavior is not constant over time, but can be varied depending on market conditions.

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Public Pension Plan Reform: The Legal Framework

Education Finance and Policy ◽

10.1162/edfp_a_00014 ◽

2010 ◽

Vol 5 (4) ◽

pp. 617-646 ◽

Cited By ~ 19

Author(s):

Amy B. Monahan

Keyword(s):

Pension Plan ◽

Legal Framework ◽

Pension Plans ◽

State Regulation ◽

Public Pension ◽

Retirement Plans ◽

School Employees ◽

Contractual Approach ◽

Public Pension Plans ◽

Pension Benefits

There is significant interest in reforming retirement plans for public school employees, particularly in light of current market conditions. This article 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 article 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.

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Annuity Pricing in Public Pension Plans: Importance of Interest Rates

10.3386/w25343 ◽

2018 ◽

Author(s):

Nino Abashidze ◽

Robert Clark ◽

Beth Ritter ◽

David Vanderweide

Keyword(s):

Interest Rates ◽

Pension Plans ◽

Public Pension ◽

Public Pension Plans

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Pension nondiscrimination rules and the incentive to cross subsidize employees

Journal of Pension Economics and Finance ◽

10.1017/s1474747206002605 ◽

2007 ◽

Vol 6 (2) ◽

pp. 127-145 ◽

Cited By ~ 4

Author(s):

PETER J. BRADY

Keyword(s):

Pension Reform ◽

Pension Plan ◽

Economic Incentive ◽

Pension Plans ◽

Compliance Costs ◽

Empirical Question ◽

Tax Benefits ◽

Pension Benefits ◽

To Receive ◽

Number Of Firms

Among the requirements a pension plan must meet to qualify for tax benefits are the nondiscrimination rules. Nondiscrimination rules are designed to ensure that pension benefits do not disproportionately accrue to highly compensated employees. But the rules are also complex and increase administrative and compliance costs associated with offering a pension plan. Recent pension reform proposals would simplify nondiscrimination rules, reducing administrative and compliance costs and potentially leading to more employers offering pension benefits. However, there are concerns that any loosening of the rules could lead to a drop in participation by low-wage workers. This paper examines the economic incentive that nondiscrimination rules provide to employers to cross subsidize employees; that is, the incentive to increase pension benefits (and total compensation) paid to low-paid workers for the express purpose of enabling high-paid workers to receive a higher proportion of compensation in the form of pension benefits. The study calculates the incentives faced by a hypothetical firm, and then illustrates how those incentives change when assumptions about employee contribution behavior, employee compensation, and employer-matching formulas are allowed to vary. Results show that only firms with a relatively low ratio of low-paid workers to high-paid workers would have an economic incentive under a standard 401(k) plan to cross subsidize employees. Although this incentive may exist in a large number of firms, these firms likely employ only a small portion of the workforce. This is ultimately an empirical question, however, and examining data on the distribution of earnings within pension plans, as well as determining if firms find nondiscrimination rules binding, would be a useful extension of this research.

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