The Growth of Participant Direction in Defined Contribution Plans

William Even () and David Macpherson

No 4088, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Since 1990, most pension plans have shifted the responsibility for directing pension assets to the employee. This study summarizes some of the possible explanations for this rapid shift toward participant direction and uses IRS Form 5500 data to investigate the effect of worker and plan characteristics on the likelihood of making a switch. The study also estimates the effect of a switch to participant direction on employee contribution and asset allocation behavior. The analysis reveals that collective bargaining and pension investments in employer stock reduce the chance of a switch to participant direction, whereas below average return performance increases the chance. Also, a switch to participant direction increases employee contributions to the pension and reduces the share of assets invested in employer securities.

Keywords: pensions; participant direction; employer stock (search for similar items in EconPapers)
JEL-codes: J32 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-03
New Economics Papers: this item is included in nep-lab
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Published - published in: Industrial Relations, 2010, 49(2), 190–208

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