Retirement Security and Defined Contribution Pension Plans: The Role of Company Stock in 401(k) Plans

2002 ◽  
Author(s):  
Jack VanDerhei
Keyword(s):  
Pension Plans ◽  
Defined Contribution ◽  
Company Stock ◽  
Retirement Security

scholarly journals Retirement Security in an Aging Population

2014 ◽  
Vol 104 (5) ◽  
pp. 1-30 ◽  
Author(s):  
James M. Poterba
Keyword(s):  
Well Being ◽  
Pension Plans ◽  
Support Program ◽  
Standard Of Living ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Private Pensions ◽  
Elderly Individuals ◽  
Income Sources ◽  
Retirement Security

Elderly individuals exhibit wide disparities in their sources of income. For those in the bottom half of the income distribution, Social Security is the most important source of support; program changes would directly affect their well-being. Income from private pensions, assets, and earnings are relatively more important for higher-income elderly individuals, who have more diverse income sources. The trend from private sector defined benefit to defined contribution pension plans has shifted responsibility for retirement security to individuals. A significant subset of the population is unlikely to be able to sustain their standard of living in retirement without higher pre-retirement saving.

scholarly journals Are Cash Balance Pension Plans A Viable Retirement Program For Corporate America?

2012 ◽  
Vol 10 (8) ◽  
pp. 451
Author(s):  
John J. Lucas
Keyword(s):  
Pension Plans ◽  
Defined Benefit ◽  
Corporate America ◽  
Defined Contribution ◽  
Cash Balance ◽  
Benefit Plan ◽  
Recent Trends ◽  
Program Option ◽  
Cash Balance Pension Plans

Cash Balance Pension Plans are a defined benefit plan where employees have a hypothetical account that increases annually, as a result of compensation credit as well as interest credit. In essence, cash balance pension plans combine elements of both a traditional defined benefit plan and a defined contribution plan (Lucas, 2007). This paper examines the recent trends and legal ruling regarding cash balance pension plans. The paper also provides an examination of the role of the Pension Protection Act (PPA) of 2006 and its impact on cash balance pension plans. An evaluation will also be presented to determine if cash balance pension plans are a viable retirement program option in corporate America.

Improving the Retirement Prospects of Lower-Wage Workers in a Defined-Contribution World

2007 ◽  
Vol 88 (3) ◽  
pp. 453-462 ◽  
Author(s):  
Judith G. Gonyea
Keyword(s):  
Financial Literacy ◽  
Pension Plans ◽  
Individual Responsibility ◽  
Retirement Savings ◽  
Defined Contribution ◽  
Savings Behavior ◽  
Service Workers ◽  
Retirement Security ◽  
Lower Wage ◽  
The Impact

Lower-wage workers have always faced challenges in saving for their retirement years. As U.S. businesses increasingly adopt defined-contribution pension plans and emphasize individual responsibility and choice, what is the impact of this shift on the working poor? Lack of pension coverage is a significant concern because Social Security alone will not assure a comfortable retirement for lower-income workers. Our survey of more than 300 lower-wage service workers revealed that significant predictors of retirement savings behavior included greater financial literacy as well as greater job stability, stronger workforce attachment, and higher income. Employer-sponsored pension plans were the most frequently used savings option. Based on the findings, we explore the potential impacts of the Pension Protection Act of 2006 (PPA) on lower-wage workers' retirement security and propose policy steps to reduce the risk of poverty being recycled into postretirement years.

Investment in employer shares, incentive alignment, and monitoring

2007 ◽  
Vol 6 (2) ◽  
pp. 107-125
Author(s):  
ISSOUF SOUMARÉ
Keyword(s):  
Pension Plans ◽  
The Other ◽  
Defined Contribution ◽  
Incentive Alignment ◽  
Company Stock ◽  
Other Hand ◽  
The One ◽  
The Cost ◽  
Very High ◽  
Do So

It is well documented that US defined contribution pension plans are largely invested in the shares of their employer. I argue that when the (single representative) worker holds shares in the firm, he tends to monitor the manager. On the one hand, the manager and shareholders gain from the productivity of the worker. On the other hand, the manager bears the cost of being monitored by the worker, and the shareholders loose part of their ownership power to the worker. Therefore, there is an optimal ownership limit for the worker from the viewpoint of the firm. I derive conditions under which the worker will never invest in the firm's stock if he has the freedom to do so. Nevertheless, under alternative conditions, it will be advantageous for the worker to invest his pension assets heavily in company stock, even if the under-diversification cost is very high.

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