Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark

Itzik Fadlon, Jessica A. Laird and Torben Nielsen ()

No 21665, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies how firms set contributions to employer-provided 401(k)-type pension plans. Using a reform that decreased the subsidy for contributions to capital pension accounts for Danish workers in the top income tax bracket, we provide strong evidence that employers' contributions are based on their employees' savings preferences. We find an immediate decrease in employer contributions to capital accounts, whose magnitude increased in the share of employees directly affected by the reform. This response was large relative to average employee responses within private IRA-type plans and was accompanied by a similar-magnitude shift of employer contributions to annuity accounts.

JEL-codes: J30 J32 J33 (search for similar items in EconPapers)
Date: 2015-10
New Economics Papers: this item is included in nep-age, nep-eur, nep-hrm and nep-lma
Note: AG LS PE
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Published as Itzik Fadlon & Jessica Laird & Torben Heien Nielsen, 2016. "Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark," American Economic Journal: Applied Economics, vol 8(3), pages 196-216.

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