Incorporating Employee Heterogeneity into Default Rules for Retirement Plan Selection
Incorporating Employee Heterogeneity into Default Rules for Retirement Plan Selection
Goda, Gopi Shah.; Manchester, Colleen Flaherty.
2013-01-31 00:00:00
We study the effect of incorporating heterogeneity into default rules by examining the choice between retirement plans at a firm that transitioned from a defined benefit (DB) to a defined contribution (DC) plan. The default plan for existing employees varied discontinuously depending on their age. Employing regression discontinuity techniques, we find that the default increased the probability of enrollment in the default plan by 60 percentage points. We develop a framework to solve for the optimal default rule analytically and numerically and find that considerable welfare gains are possible if defaults vary by observable characteristics.
http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.pngJournal of Human ResourcesUniversity of Wisconsin Presshttp://www.deepdyve.com/lp/university-of-wisconsin-press/incorporating-employee-heterogeneity-into-default-rules-for-retirement-pVPMyL01Hb
Incorporating Employee Heterogeneity into Default Rules for Retirement Plan Selection
We study the effect of incorporating heterogeneity into default rules by examining the choice between retirement plans at a firm that transitioned from a defined benefit (DB) to a defined contribution (DC) plan. The default plan for existing employees varied discontinuously depending on their age. Employing regression discontinuity techniques, we find that the default increased the probability of enrollment in the default plan by 60 percentage points. We develop a framework to solve for the optimal default rule analytically and numerically and find that considerable welfare gains are possible if defaults vary by observable characteristics.
Journal
Journal of Human Resources
– University of Wisconsin Press
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