Trends in Pension Benefit Formulas and Retirement Provisions

57 Pages Posted: 14 Aug 2007 Last revised: 27 Mar 2022

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)

Date Written: June 1991

Abstract

Changes in pension plan retirement formulas and benefit provisions over the last decade are examined, drawing on data collected and tabulated by the U.S. Department of Labor's Employee Benefits Survey of medium and large firms. The evidence shows that pension provisions have changed a great deal over the last decade, among both defined benefit and defined contribution plans. In the defined benefit environment, participation and vesting rules changed substantially; early retirement became more accessible and benefits somewhat more generous; normal retirement ages declined; and pension benefits were increasingly likely to depend on final rather than career earnings. Benefit integration with social security also grew to almost two-thirds of all participants in defined benefit plans. Overall, though pension replacement rates rose slightly over time, benefit ceilings remained pervasive for work at older ages and disability benefit provisions became more stringent. Defined contribution pension plans also changed a great deal over the decade of the 1980s. Workers were increasingly likely to be covered by combinations of defined benefit and defined contribution plans, with the latter usually a savings and thrift plan permitting a lump sum distribution. Profit sharing and stock plans appear to have stagnated during the latter part of the 1980s.

Suggested Citation

Mitchell, Olivia S., Trends in Pension Benefit Formulas and Retirement Provisions (June 1991). NBER Working Paper No. w3744, Available at SSRN: https://ssrn.com/abstract=473924

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
United States

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