طرح های تعریف شده سهم، برنامه های مزایای تعریف شده، و انباشت ثروت بازنشستگی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|22892||2007||25 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Public Economics, Volume 91, Issue 10, November 2007, Pages 2062–2086
The private pension structure in the United States, once dominated by defined benefit (DB) plans, is currently divided between defined contribution (DC) and DB plans. Wealth accumulation in DC plans depends on a participant's contribution behavior and on financial market returns, while accumulation in DB plans is sensitive to a participant's labor market experience and to plan parameters. This paper simulates the distribution of retirement wealth under representative DB and DC plans. It uses data from the Health and Retirement Study (HRS) to explore how asset returns, earnings histories, and retirement plan characteristics contribute to the variation in retirement wealth outcomes. We simulate DC plan accumulation by randomly assigning individuals a share of wages that they and their employer contribute to the plan. We consider several possible asset allocation strategies, with asset returns drawn from the historical return distribution. Our DB plan simulations draw earnings histories from the HRS, and randomly assign each individual a pension plan drawn from a sample of large private and public defined benefit plans. The simulations yield distributions of both DC and DB wealth at retirement. Average retirement wealth accruals under current DC plans exceed average accruals under private sector DB plans, although DC plans are also more likely to generate very low retirement wealth outcomes. The comparison of current DC plans with more generous public sector DB plans is less definitive, because public sector DB plans are more generous on average than their private sector DB counterparts.
Private retirement arrangements in the United States were once predominantly defined benefit (DB) pension plans. In the last two decades, however, there has been a shift toward defined contribution (DC) arrangements. Very few firms have created new DB plans and many firms have moved toward greater reliance on DC plans, particularly for new workers. Many rapidly expanding industries have relied on DC rather than DB plans to provide for employee retirement. Buessing and Soto's (2006) analysis of data from Department of Labor Form 5500 filings shows that the number of individuals who participate only in a private sector DB plan has declined from 9.6 million in 1990 to 6.6 million in 2003. The number of individuals covered by both a DB and a DC plan has been roughly constant at nearly 14 million. The number of private sector employees with only DC coverage has risen from 11.5 million in 1990 to 30.1 million in 2003. These trends are likely to emerge in more recent data as well. Munnell and Soto (2007) explain that many firms have “frozen” DB plans since 2003. Workers covered by DB plans are increasingly concentrated in the public sector. The U.S. Census Bureau (2006) reports 2659 federal, state, and local pension systems in the U.S., covering 17.9 million workers. Although the Census Bureau does not collect detailed data on plan type, a Pensions and Investments survey in 2004 shows that 224 of the 1000 largest pension plans were public sector plans, with DB assets representing 89.3% of all public sector pension assets. Among public sector plans, 62% have no DC assets, while for 89% DC assets are less than one fifth of combined DB and DC assets. The first Pensions and Investments survey in 1997 yields almost identical statistics. The growth of private sector DC plans has given employees new responsibility for managing retirement assets and made retirement wealth accumulation a function of an employee's contribution and asset allocation decisions. Accrued benefits in DB plans do not depend on financial market returns, except in extreme circumstances such as plan insolvency. Benefits in DC plans, however, are a function of financial market returns. Some analysts have suggested that DC plans expose prospective retirees to greater risk than DB plans because of this link. Several recent studies have examined financial market risk in DC plans and the role of asset allocation choices in controlling this risk. Shiller (2005) studies a variety of asset allocation rules in the context of a private accounts Social Security system — essentially a mandatory DC system. Poterba, Rauh, Venti, and Wise (hereafter PRVW, in press) examine how age-related adjustments in asset allocation, such as those associated with lifecycle mutual funds, affect the distribution of DC plan balances at retirement. Net-of-expense asset returns over the course of a DC plan participant's working life, asset allocation, and the participant's contribution rate are key determinants of these balances. Although accumulations in DC plans are risky, they are not necessarily riskier than accumulations in DB plans. While many researchers have recognized that DB plan accumulations plans are uncertain from the participant's perspective, few have tried to compare the risks of DB and DC plans. Four previous studies are particularly noteworthy. Balcer and Sahin (1979) compare DB and DC plans in a lifecycle setting, recognizing that earnings uncertainty and job transitions have an important effect on the accumulated wealth of DB plan participants. Bodie, Marcus, and Merton (1988) note that DB and DC plans both entail risks, but that these risks are different. Neither of these studies make quantitative estimates of relative risks; two more recent studies do. Samwick and Skinner (2004) use data from the 1983 and 1989 Survey of Consumer Finances and the associated Pension Provider Supplement (PPS) to summarize DC and DB plan attributes. They generate synthetic earnings histories under the assumption that the logarithm of earnings follows a random walk with age-related drift, and they evaluate DB and DC wealth accumulation for these earnings histories. This approach may miss subtle stochastic properties of actual earnings histories. The results suggest that for many workers DC plan accumulations are likely to exceed the actuarial present discounted value (PDV) of DB plan benefits. Finally, Schrager (2006) uses data on earnings and job change patterns from the Panel Survey of Income Dynamics to study related issues. She finds that job turnover increased in the 1990s, making DC plans more attractive relative to DB plans for many workers. Both of the empirical studies parameterize the earnings and job change processes, thereby suppressing some of the richness in individual earnings histories. One of the key risks in both DB and DC wealth accumulation is an ex ante risk that workers face when they accept a job: what does the firm's DC or DB plan offer? There is substantial variation in the generosity of employer matching contributions in DC plans, and in the normal retirement age and level of post-retirement benefits in DB plans. In addition to these ex ante risks, workers also face ex post risks that are realized as their working career unfolds. These include their earnings path, which is a key input directly to DB wealth accruals and which affects the capacity to make DC contributions, the economic fortunes of their employer, which may lead to changes in the retirement plan parameters, their job tenure and the number of jobs they hold over their working career, the choices they make in a DC plan, and the financial market returns that they earn on their DC plan investments. Some components of both the ex ante and ex post risk are under the control of the worker, who may decide whether or not to work for a firm with particular pension characteristics, whether or not to voluntarily separate from a firm with a DB plan, or whether or not to contribute the maximum amount to a DC plan. This paper draws on lifetime earnings histories from the Health and Retirement Study (HRS) to summarize the variation in DB and DC plan accumulations at retirement. Our analysis summarizes the total variation in such accumulations, combining both ex ante and ex post risk components. The HRS data enables us to capture individual-level heterogeneity in age-earnings profiles and in job transitions. Much of the variation in retirement wealth accruals is due to cross-sectional differences in earnings profile. While we use that information to make individual-level calculations of retirement benefits, we then summarize the results by averaging across individuals. Our results do not emphasize the cross-sectional differences in pension wealth that result from different earnings histories. We employ historical asset return distributions to simulate the distribution of financial outcomes for DC plan participants with various asset allocation patterns, and the HRS DB Pension Calculator to simulate post-retirement benefits under a sample of large DB plans. We simulate a range of potential return histories and thereby evaluate how financial market uncertainty affects the variation in pension wealth. The paper is divided into six sections. Section 2 describes our sub-sample of HRS households. It also describes the DC plans that these households participate in, with particular attention to the share of salary that employers and employees contribute to the plan. Section 3 describes our algorithm for simulating the distribution of DC retirement plan assets. It draws substantially on Poterba et al., 2005 and Poterba et al, in press. Section 4 describes our algorithm for computing DB plan accumulations and explains how we impute job transitions to HRS respondents. Section 5 presents our estimate of the distribution of DC and DB plan accumulations for a sample of representative plans. Section 6 discusses the broader issue of the risk measurement for DB and DC plans, and it identifies a number of factors that we have not modeled that might contribute to variation in retirement wealth outcomes. There is a brief conclusion.
نتیجه گیری انگلیسی
This paper presents new evidence on the expected value of retirement wealth accruals under defined benefit (DB) and defined contribution (DC) retirement plans, and on the dispersion of such accruals. We use actual retirement plans that cover respondents in the Health and Retirement Study, and compute prospective wealth accruals using the actual earnings and employment history of these respondents. Our calculations recognize variation in retirement wealth accruals due to: (i) variation in which plan the individual's employer will offer; (ii) differences in the individual's employment history and earnings trajectory; and (iii) variation in the returns earned by investments held in DC plans. We compare, in a similar framework, the asset market risk facing participants in DC plans and the employment history risk facing DB plan participants. We find substantial differences in the generosity of DB plans in the public and private sectors, and present separate results for these two cases. Our estimates of the average level of wealth accumulated in DC plans depend on how the participant allocates assets across different investment options. Private sector DB plans almost always yield lower average retirement wealth accumulation than private DC plans, although they are also less likely to generate very low retirement wealth outcomes. The comparison between public sector DB plans and representative private sector DC plans is more difficult. If equity returns follow their historical empirical distribution, an individual in a DC plan who makes substantial equity investments will usually achieve a higher retirement wealth in a DC plan than in a public sector DB plan. If equity returns are reduced by 300 basis points relative to their historical empirical distribution, the distribution of outcomes with the DC plan may look less attractive than the DB plan for some risk-averse households. Our findings represent a first step toward comparing the relative risks of DB and DC plans using actual earnings histories rather than parametric forms for the earnings and job change process. A natural next step in our research involves comparing the distribution of actual DB and DC wealth in the HRS with the distributions that emerge from our simulations. Since we are using the actual earnings histories of HRS respondents, if respondents are matched randomly to pension plans, as we assume, and if the pension plan environment has been stationary through the working life of the HRS respondents, which it has not been, then the observed distribution should be similar to the one generated by our simulations. Because most HRS retirees with assets in DC plans participated in these plans for only a fraction, and in some cases a small fraction, of their work life, an appropriate comparison would require modifying the simulation algorithm to allow for part-career DC plan exposure. This is a natural direction for further work. There are many ways in which our algorithm for computing retirement wealth could be extended and improved. For example, we do not allow for lump sum distributions from DC plans that may exert a potentially important drag on retirement wealth accumulation. Engelhardt (2002) finds little evidence that distributions have resulted in significant pension leakage. Poterba, Venti, and Wise (1998b) also find that these distributions are small, perhaps smaller than 401(k) plan administrative costs. However, Poterba, Venti, and Wise (2007) estimate that leakages are somewhat more important. We have not allowed for differences in asset allocation patterns as a function of individual characteristics, such as education, even though past research such as Ameriks and Zeldes (2004) suggest that there are such differences. We do not allow earnings trajectories or the length of the work life to respond to the structure of pension arrangements, even though Friedberg and Webb (2005) suggest that DC plan participants have longer work lives than their DB counterparts, at least potentially because of the retirement incentives that are incorporated in many DB plans. We have not considered the possibility of restrictions on investment decisions in DC plans, such as requirements that participants hold part of their account in company stock. This may increase the volatility of the equity investments held by DC plan participants. We have not considered the role of corporate changes in pension arrangements, such as the risk of a DB plan “freeze” or even a plan termination. This would add additional dispersion to our distribution of retirement wealth outcomes. We have not explored the role of death in affecting the accrual value of pension assets, even though premature death can have very different effects on DB and DC plan benefits, when viewed from the perspective of an bequest recipient. Finally, for evaluating the link between pension accruals and household welfare, there are unresolved conceptual issues associated with the measurement of non-retirement wealth available to households. Consider the case of housing wealth. If such wealth is a potential source of retirement income support, then the potential cost of a relatively low DB and DC plan accrual may be much lower than if housing wealth cannot be tapped in retirement. Addressing these issues will add greater realism to our simulation algorithm.