Dimensions of 401(K) Plan Design

29 Pages Posted: 30 Jun 2006

See all articles by Olivia S. Mitchell

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Stephen P. Utkus

University of Pennsylvania; Center for Financial Markets and Policy, Georgetown University

Tongxuan Yang

University of Pennsylvania - Insurance & Risk Management Department

Date Written: 2005

Abstract

This paper explores why plan sponsors design their 401(k) plans the way they do. Employing a unique, rich dataset of over five hundred 401(k) plans, we find that these plans are principally a form of tax-motivated compensation under the restriction of federal non-discrimination rules. In other words, to appeal to better-paid workers, employers offer more generous monetary and nonmonetary plan design features. At the same time, complex federal tax rules restrict pay discrimination in favor of the highly-paid employees.

Suggested Citation

Mitchell, Olivia S. and Utkus, Stephen P. and Yang, Tongxuan, Dimensions of 401(K) Plan Design (2005). Pension Research Council WP2005-05, Available at SSRN: https://ssrn.com/abstract=912274 or http://dx.doi.org/10.2139/ssrn.912274

Olivia S. Mitchell (Contact Author)

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Stephen P. Utkus

University of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Center for Financial Markets and Policy, Georgetown University ( email )

Washington, DC 20057
United States

Tongxuan Yang

University of Pennsylvania - Insurance & Risk Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6365
United States

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