We estimate labor demand elasticities to predict the employment effects of an employer’s contributory pillar in Chile’s pension system. The Chilean system has been a model for reform in many countries worldwide. We find labor demand to be inelastic, with baseline estimates ranging from −0.27 to −0.91. We predict that the implementation of an employer contributory pillar with contribution rates of 1% increase would increase unemployment rates by 0.20 to 0.71 percentage points (pp) from a baseline unemployment of 6.51%. Our results show sizable differences in labor demand elasticities and employment impacts by industry and workforce characteristics. Simulations imply implementing a uniform employer contributory pillar would especially reduce employment for low-skilled workers and workers in industries where labor is easily substitutable.

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5 percent chance of financial ruin can withdraw just 2.31 percent per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

Due to the implementation of several pension reforms, Italian individuals have to take more complex financial decisions and have more responsibilities on their retirement well-being which also includes the choice of whether to participate in pension funds. Relying on novel survey data, we empirically investigate the effect of pension and financial knowledge on the probability of pension plan participation in Italy. Despite documenting the already well-known trends about disparities in the level of such knowledge, we are able to establish that only pension literacy has a positive and causal effect on the probability to participate in a private pension fund.

We study the incidence of Social Security taxes on teacher wages and employment. On average, we estimate teachers with Social Security coverage take home 9.6 percent less in wages than observationally similar teachers in similar districts without Social Security coverage. This accounts for about three-fourths of the 12.4-percent total Social Security tax. Moreover, our analysis suggests this is likely a lower-bound estimate of the true incidence of Social Security taxes – under reasonable assumptions, we cannot rule out full (100%) tax incidence on teacher wages. We find no evidence of tax incidence on teacher staffing levels.

We analyze the disclosures of sustainable investing by Dutch pension funds in their annual reports by introducing a novel textual analysis approach using state-of-the-art natural language processing techniques to measure the awareness and implementation of sustainable investing. We find that a pension fund's size increases both the awareness and implementation of sustainable investing. Moreover, we analyze the role of signing a sustainable investment initiative. Although signing this initiative increases the specificity of pension fund statements about sustainable investing, we do not find an effect on the implementation of sustainable investing.

The Pension Benefit Guaranty Corporation (PBGC) becomes the trustee for private defined benefit plans that have defaulted. The PBGC pays retirement benefits as provided by the plan and that are consistent with federal guidelines concerning the type and amounts of distributions. In response to a Freedom of Information Request, the PBGC provided us with relevant information on all individuals who received retirement benefits from the PBGC in the last 10 years, over 250,000 retirees. Individuals requesting payouts from PBGC managed plans have the option of selecting either a single-life annuity or a joint-and-survivor (J&S) annuity. We examine the PBGC distributions chosen over the last decade and how they vary by age at retirement, sex, months of service, and other relevant variables. Key findings indicate that men are much more likely to choose a joint and survivor annuity compared to female claimants, and the difference increases with age. Conditional on selecting a J&S annuity, men are more likely to select a 100 percent survivor's annuity, while women tend to choose a 50 percent survivor's benefit.

We evaluate the impact of the 2017 Tax Cuts & Jobs Act (TCJA) pension tax break on sponsor contributions to defined-benefit retirement plans. We exploit cross-sectional variation in ex-ante exposure to the tax break. We find that the tax break induced an extra $2.8 billion of sponsor contributions to medium- and large-scale plans in 2017. However, we find strong evidence of reversal, both in terms of sponsor contributions and plan funding ratios by 2018. Our contributions model indicates that this reversal is consistent with more binding financial constraints in 2018 relative to 2019. Our results suggest that the TCJA did not have a long-lasting impact on corporate defined-benefit pension funds.

This paper investigates the relationship between growth and quality of pension funds. It measures growth in terms of changes in the number of participants and cash flow transfers and appreciates the quality of the funds through the set of information on past results and costs published in the official prospectuses. The results show that growth rewards the best performing funds in the long term, while annual performance and costs have no relevance. Nevertheless, other factors, such as market power and commercial pressure, appear to be more powerful. The existence of conditions of market power capable of attracting investors beyond the actual quality of pension products is undesirable as it harms future pensioners. These results have implications for the Authority, as mandatory information should be suitable to induce investors to identify the best products and direct individual choices toward the public objective of a more efficient market.

Despite a decade-long bull market between the financial crisis and the COVID-19 recession, state defined benefit pension plans had accrued more than $1.37 trillion in unfunded liabilities. However, little work has investigated the actuarial sources of these unfunded liabilities. This paper uses original data hand collected from publicly available financial reports between 2000 and 2020 for 145 state-administered pension plans to determine the sources of unfunded liabilities. The largest unfunded liability contributor is investment experiences (when actual investment returns do not match assumed returns). The second and third largest contributors are changes to actuarial assumptions and expected changes (or interest accruing on existing unfunded liabilities). Benefit experience and legislative changes, demographic experience, and explicit funding shortfalls account for relatively little of the growth in unfunded liabilities. Moreover, the specific sources of unfunded liabilities are heterogeneous over time and across plans.

Is it possible to achieve almost riskless, nonfluctuating investment payoffs in the long run, at a fraction of the traditional funding requirement, using equity investments? What is their shortfall risk? These questions are motivated by the need to increase yields, while limiting the variability of investment results. We show how to use contingent claims, denominated in units of a stock index, to achieve an almost riskless investment outcome. To control the risk of the proposed hedge portfolios, we introduce an overfunded scheme and show its reliability using bootstrapping. Results show that a modest amount of overfunding is an effective risk-management approach that brings the probability of not achieving the target to less than 1 percent. Our results are based on the use of the minimal market model and a change of numeraire. Robustness tests support their validity under different market specifications.