We develop an equilibrium theory of employer-sponsored retirement plan design using a behavioral contract theory approach. The operation of the labor market results in retirement plans that generally cater to, rather than correct, workers' mistakes. Our theory provides new explanations for a range of facts about retirement plan design, including the use of employer matching contributions and the use of default contribution rates in automatic enrollment plans that lower many workers' savings. We provide novel evidence for our theory from a sample of plans.
Bubb, Ryan, and Patrick L. Warren.
"An Equilibrium Theory of Retirement Plan Design."
American Economic Journal: Economic Policy,
Economics of Contract: Theory
Household Saving, Borrowing, Debt, and Wealth
Retirement; Retirement Policies
Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions