Announcements

THE SOCIAL INSURANCE RESEARCH NETWORK (SIRN), sponsored by the National Academy of Social Insurance (NASI) The Social Insurance Research Network (SIRN), directed by Larry Atkins, President, National Academy of Social Insurance, is an online venue providing access to scholarly research and professional announcements in the Social Insurance community. Social Insurance includes the systems for insuring workers and their families against economic insecurity caused by the loss of income from work and the cost of health care, such as Social Security, Medicare, Workers' Compensation, unemployment insurance, related social assistance and private employee benefits. NASI is a nonprofit, nonpartisan organization made up of the nation's leading experts on social insurance. Its mission is to promote understanding and informed policymaking on social insurance and related programs through research, public education, training, and the open exchange of ideas. SIRN is dedicated to increasing communication among social insurance scholars, practitioners, and policy makers throughout the world.


Table of Contents

Social Security in an Analytically Tractable Overlapping Generations Model with Aggregate and Idiosyncratic Risk.

Daniel Harenberg, Swiss Federal Institute of Technology Zurich - CER-ETH - Center of Economic Research at ETH Zurich
Alexander Ludwig, Goethe University Frankfurt - Research Center SAFE, University of Cologne - Faculty of Management, Economics and Social Sciences

Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2013

Craig Copeland, Employee Benefit Research Institute (EBRI)

Distributional Effects of Means Testing Social Security: An Exploratory Analysis

Alan L. Gustman, Dartmouth College - Department of Economics, National Bureau of Economic Research (NBER)
Thomas L. Steinmeier, Texas Tech University - Department of Economics and Geography
Nahid Tabatabai, Dartmouth College - Department of Economics

Social Security in an Analytically Tractable Overlapping Generations Model with Aggregate and Idiosyncratic Risk

Daniel Harenberg, Swiss Federal Institute of Technology Zurich - CER-ETH - Center of Economic Research at ETH Zurich
Alexander Ludwig, Goethe University Frankfurt - Research Center SAFE, University of Cologne - Faculty of Management, Economics and Social Sciences

Life-Cycle Consumption, Asset Allocation, and Pension Design Under Non-Standard Preferences

Stefan Zimmermann, University of Vienna - Faculty of Business, Economics, and Statistics


SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"Social Security in an Analytically Tractable Overlapping Generations Model with Aggregate and Idiosyncratic Risk." Free Download
Max Planck Institute for Social Law and Social Policy Discussion Paper No. 290-14

DANIEL HARENBERG, Swiss Federal Institute of Technology Zurich - CER-ETH - Center of Economic Research at ETH Zurich
Email:
ALEXANDER LUDWIG, Goethe University Frankfurt - Research Center SAFE, University of Cologne - Faculty of Management, Economics and Social Sciences
Email:

When markets are incomplete, social security can partially insure against idiosyncratic and aggregate risks. We incorporate both risks into an analytically tractable model with two overlapping generations and demonstrate that they interact over the life-cycle. The interactions appear even though the two risks are orthogonal and they amplify the welfare consequences of introducing social security. On the one hand, the interactions increase the welfare benefits from insurance. On the other hand, they can in- or decrease the welfare costs from crowding out of capital formation. This ambiguous effect on crowding out means that the net effect of these two channels is positive, hence the interactions of risks increase the total welfare benefits of social security.

"Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2013" Free Download
EBRI Issue Brief, No. 405 (October 2014)

CRAIG COPELAND, Employee Benefit Research Institute (EBRI)
Email:

This paper examines the level of participation by workers in public- and private-sector, employment-based pension or retirement plans, based on the U.S. Census Bureau’s March 2014 Current Population Survey (CPS), the most recent data currently available. It begins with an overview of retirement plan types and participation in these types of plans and describes the data used in this study, along with their relative strengths and weaknesses. From these data, results on participation in employment-based retirement plans are analyzed for 2013 across various worker and employer characteristics. The report then explores retirement plan participation across U.S. geographical regions, including state-by-state comparisons, as well as comparisons by certain consolidated statistical areas (CSAs). In addition, trends from 1987-2013 in employment-based retirement plan participation are presented across many of the same worker and employer characteristics that are used for 2013. Furthermore, an accounting of the number of individuals who worked for employers that did not sponsor a plan and of workers who did not participate in a plan in 2013 is provided by various demographic and employer characteristics. The percentage of workers participating in an employment-based retirement plan increased in 2013, increasing for the first time since 2010 among all workers and private-sector workers. The retirement plan participation level depends on the type of worker being considered: Among all American workers in 2013, 51.3 percent worked for an employer or union that sponsored a retirement plan (the sponsorship rate), while 40.8 percent participated in a plan. Among wage and salary workers ages 21-64, the sponsorship rate increased to 56.0 percent, and the portion participating increased to 45.8 percent. Among full-time, full-year wage and salary workers ages 21-64, the sponsorship rate was 62.3 percent and 54.5 percent of the workers participated in a retirement plan. Almost 74 percent of wage and salary public-sector workers participated in an employment-based retirement plan. Being white or having attained a higher educational level were also associated with higher probabilities of participating in a retirement plan. Of the 67.9 million wage and salary workers who worked for an employer who did not sponsor a plan, 17.9 million (26.4 percent) were ages 25 or younger or 65 or older. Almost 30 million (43.6 percent) were not full-time, full-year workers, and 29.2 million (43.0 percent) had annual earnings of less than $20,000. Furthermore, 39.3 million (57.8 percent) worked for employers with less than 100 employees. Workers at large employers were far more likely to participate than those at smaller firms.

"Distributional Effects of Means Testing Social Security: An Exploratory Analysis" Free Download
Michigan Retirement Research Center Working Paper No. 2014-306

ALAN L. GUSTMAN, Dartmouth College - Department of Economics, National Bureau of Economic Research (NBER)
Email:
THOMAS L. STEINMEIER, Texas Tech University - Department of Economics and Geography
Email:
NAHID TABATABAI, Dartmouth College - Department of Economics
Email:

This paper examines the distributional implications of introducing additional means testing of Social Security benefits where proceeds are used to help balance Social Security’s finances. Benefits of the top quarter of households ranked according to the relevant measure of means are reduced using a modified version of the Social Security Windfall Elimination Provision (WEP). The replacement rate in the first bracket of the benefit formula, determining the Primary Insurance Amount (PIA), would be reduced from 90 percent to 40 percent of Average Indexed Monthly Earnings (AIME).

Four measures of means are considered: total wealth; an annualized measure of AIME; the wealth value of pensions; and a measure of average indexed W2 earnings. The empirical analysis, based on data from the Health and Retirement Study, starts with a baseline benefit for each household, calculated as the product of the average benefit-tax ratio under the current system, multiplied by the taxes paid by the household.

These means tests would reduce total household benefits by 7 to 9 percentage points, amounting to 15.4 to 16.4 percent of the benefits of affected workers at baseline. We find that the basis for means testing Social Security makes a substantial difference as to which households have their benefits reduced, and that different means tests may have different effects on the benefits of families in similar circumstance. We also find that the measure of means used to evaluate the effects of a means test makes a considerable difference as to how one would view the effects of the means test on the distribution of benefits.

"Social Security in an Analytically Tractable Overlapping Generations Model with Aggregate and Idiosyncratic Risk" Free Download
SAFE Working Paper No. 71

DANIEL HARENBERG, Swiss Federal Institute of Technology Zurich - CER-ETH - Center of Economic Research at ETH Zurich
Email:
ALEXANDER LUDWIG, Goethe University Frankfurt - Research Center SAFE, University of Cologne - Faculty of Management, Economics and Social Sciences
Email:

When markets are incomplete, social security can partially insure against idiosyncratic and aggregate risks. We incorporate both risks into an analytically tractable model with two overlapping generations and demonstrate that they interact over the life-cycle. The interactions appear even though the two risks are orthogonal and they amplify the welfare consequences of introducing social security. On the one hand, the interactions increase the welfare benefits from insurance. On the other hand, they can in- or decrease the welfare costs from crowding out of capital formation. This ambiguous effect on crowding out means that the net effect of these two channels is positive, hence the interactions of risks increase the total welfare benefits of social security.

"Life-Cycle Consumption, Asset Allocation, and Pension Design Under Non-Standard Preferences" Free Download

STEFAN ZIMMERMANN, University of Vienna - Faculty of Business, Economics, and Statistics
Email:

This paper uses a behavioral life-cycle model to analyze different pension schemes when people display non-standard consumption preferences and income-heterogeneity. Retirement resources depend on public pension benefits and individual savings accumulated over working life. Individual savings crucially depend on the choice between low-risk and high-risk assets, because there is a sizable return gap. Mainstream economic models do not adequately capture peoples’ life-cycle asset allocation patterns, that is, their investment in safe and risky assets. The proposed model makes a better prediction. I investigate whether a transition towards a funded pension scheme is desirable, and whether different income classes could benefit from different pension schemes. The rationale is that a non-funded pension component provides better downward risk protection for the low-income earners, whereas a funded pension component is more appealing to rent-seeking, high-income earners. Simulation results reveal that a funded pension scheme is most promising for all income classes — considering reasonable demographic and financial market projections for Germany.

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About this eJournal

This eJournal distributes working and accepted paper abstracts on all topics related to old age pensions and retirement. This includes papers on social security, employment based pensions and other publicly provided or tax-favored mechanisms for retirement income. The journal welcomes submissions from any discipline and a broad range of topic areas, including benefit adequacy, pension finance, the design and reform of social security and pension systems, retirement policy, and comparative analyses of U.S. pension and retirement issues with those of other countries.

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Directors

SIRN SUBJECT MATTER EJOURNALS

LARRY ATKINS
National Academy of Social Insurance (NASI)
Email: latkins@nasi.org

Please contact us at the above addresses with your comments, questions or suggestions for SIRN-Sub.

Advisory Board

Social Security, Pensions & Retirement Income eJournal

HENRY J. AARON
Bruce and Virginia MacLaury Senior Fellow, Brookings Institution - Economic Studies Program

KENNETH S. APFEL
Director, Management, Finance and Leadership Program - University of Maryland

MERTON C. BERNSTEIN
Walter Coles Professor of Law Emeritus, Washington University in Saint Louis - School of Law

BING YUNG-PING CHEN
Frank J. Manning Eminent Scholar's Chair in Gerontology, University of Massachusetts Boston - Gerontology Institute

ERIC R. KINGSON
Professor of Social Work and Public Administration, Syracuse University - School of Social Work

OLIVIA S. MITCHELL
Professor of Business Economics and Public Policy, Professor of Insurance and Risk Management, Executive Director, Pension Research Council, University of Pennsylvania - The Wharton School, National Bureau of Economic Research (NBER)

ALICIA MUNNELL
Peter F. Drucker Professor in Management Sciences, Boston College - Center for Retirement Research

JOHN L. PALMER
University Professor, Syracuse University - Maxwell School of Citizenship and Public Affairs

STANFORD G. ROSS
Attorney and Consultant, Arnold & Porter, Chair, Social Security Advisory Board

C. EUGENE STEUERLE
Senior Fellow, Urban Institute

LAWRENCE H. THOMPSON
Senior Fellow, Urban Institute

JACK VANDERHEI
Research Director, Employee Benefit Research Institute (EBRI)

JOHN B. WILLIAMSON
Professor of Sociology, Boston College - Department of Sociology