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Applicability of the Notional Defined Contribution (NDC) Model in United States Social Security: Comparing the NDC Model and the Defined Benefit Model

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  • Hyosang Min
  • Jungwook Seo

Abstract

This paper accounts for the necessity of structural reform and examines the notional defined contribution (NDC) model against the defined benefit (DB) model in the U.S. pension system. This study comes up with a robust NDC on the basis of population and financial sustainability. On the individual level, this article calculates the new optimum premium rate and the income replacement rate when the old-age pension is converted to NDC. Second, we present several scenarios for forecasting the long-term sustainability of Social Security, depending on a macro-level actuarial analysis.

Suggested Citation

  • Hyosang Min & Jungwook Seo, 2012. "Applicability of the Notional Defined Contribution (NDC) Model in United States Social Security: Comparing the NDC Model and the Defined Benefit Model," International Review of Public Administration, Taylor & Francis Journals, vol. 17(1), pages 33-53, April.
    • Handle: RePEc:taf:rrpaxx:v:17:y:2012:i:1:p:33-53
    DOI: 10.1080/12264431.2012.10805216
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    1. Alan J. Auerbach & Ronald Lee, 2009. "Notional Defined Contribution Pension Systems in a Stochastic Context: Design and Stability," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 43-68, National Bureau of Economic Research, Inc.
    2. Palmer, Edward, 2000. "The Swedish pension reform model : framework and issues," Social Protection Discussion Papers and Notes 23086, The World Bank.
    3. Eduardo A. Haddad & Jaime Bonet & Geoffrey J. D. Hewings, 2023. "Introduction and Overview," Advances in Spatial Science, in: Eduardo A. Haddad & Jaime Bonet & Geoffrey J. D. Hewings (ed.), The Colombian Economy and Its Regional Structural Challenges, chapter 0, pages 1-16, Springer.
    4. Disney, Richard, 1999. "Notional accounts as a pension reform strategy : an evaluation," Social Protection Discussion Papers and Notes 21302, The World Bank.
    5. Peter A. Diamond & Peter R. Orszag, 2005. "Saving Social Security," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 11-32, Spring.
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    1. Hind El-Houjjaji & Abdellah Echaoui, 2020. "Notional Defined Contribution Accounts: An Application To Morocco," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 25, pages 93-108, June.
    2. Alonso-García, J. & Devolder, P., 2016. "Optimal mix between pay-as-you-go and funding for DC pension schemes in an overlapping generations model," Insurance: Mathematics and Economics, Elsevier, vol. 70(C), pages 224-236.

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