Institutional Affiliation: Board of Governor of the Federal Reserve System
|Employee Decisions with Respect to 401(k) Plans: Evidence From Individual-Level Data|
with , : w4635
401(k) plans have been the most rapidly growing type of employer- provided pension plan during the last decade. This paper utilizes employee-level data from the 401(k) plan at a medium-sized U.S. manufacturing firm to analyze the participation and contribution decisions of workers eligible for this plan. Our analysis reveals two important features of 401(k) participant behavior. First, contribution decisions of eligible employees are relatively insensitive to the rate of employer matching on worker contributions. Most employees maintain the same participation status and contribution rate year after year, despite substantial changes in the employer's match rate at the firm we study. This suggests that employer matching may not be a critical factor in explaining the growth of 401(k) plan...
Published: in Olivia Mitchell and Syllvester Schieber, eds., Living with Defined Contribution Pensions: Remaking Responsibility for Retirement. (University of Pennsylvania Press, 1997).