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Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark

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  • Itzik Fadlon
  • Jessica Laird
  • Torben Heien Nielsen

Abstract

This paper studies how firms set contributions to employer provided 401(k)-type pension plans. Using a reform that decreased the subsidy to contributions to capital pension accounts for Danish workers in the top income tax bracket, we provide strong evidence that employers' contributions are based on their employees' savings preferences. We find an immediate decrease in employer contributions to capital accounts, whose magnitude increased in the share of employees directly affected by the reform. This response was large relative to average employee responses within private IRA-type plans and was accompanied by a similar magnitude shift of employer contributions to annuity accounts.

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  • Itzik Fadlon & Jessica Laird & Torben Heien Nielsen, 2016. "Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 196-216, July.
    • Handle: RePEc:aea:aejapp:v:8:y:2016:i:3:p:196-216
    Note: DOI: 10.1257/app.20150015
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    Cited by:

    1. Esteban García-Miralles & Jonathan M. Leganza, 2024. "Public Pensions and Private Savings," American Economic Journal: Economic Policy, American Economic Association, vol. 16(2), pages 366-405, May.

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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    1. Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark (American Economic Journal: Applied Economics 2016) in ReplicationWiki

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