The Design of Defined Contribution Plans / Vivek Bhattacharya, Gastón Illanes.

Format:

Book

Author/Creator:

Bhattacharya, Vivek.

Contributor:

National Bureau of Economic Research.

Illanes, Gastón.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29981.

NBER working paper series no. w29981

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

Defined contribution (DC) plans are a major vehicle for retirement savings in the US, holding almost $10 trillion in assets under management. In recent years, the quality and availability of these plans has been the subject of active policy attention and of several major lawsuits. This paper studies how employers and plan providers (recordkeepers) design these plans. We argue that low plan quality and limited provision can come from two sources. First, employer willingness to pay may be misaligned with that of workers or of regulators. Second, the market for recordkeeping may be imperfectly competitive. We propose a model of plan design and estimate that while both frictions are at play, significant changes to plan quality require modifying employer preferences. Accordingly, we evaluate proposed policies and conclude that only direct quality regulation can lead to significant quality improvements. Recent proposals can increase plan provision but have negligible quality effects.

Notes:

Print version record

April 2022.