An Equilibrium Theory of Retirement Plan Design

51 Pages Posted: 16 Aug 2016 Last revised: 16 Aug 2019

See all articles by Ryan Bubb

Ryan Bubb

New York University School of Law

Patrick L. Warren

Clemson University - John E. Walker Department of Economics

Date Written: July 9, 2019

Abstract

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, rather than raise, many workers' savings. We provide novel evidence for our theory from a sample of plans.

Keywords: behavioral contract theory, retirement, defaults, 401k

JEL Classification: D14, D86, D91, J26, J32

Suggested Citation

Bubb, Ryan and Warren, Patrick L., An Equilibrium Theory of Retirement Plan Design (July 9, 2019). NYU Law and Economics Research Paper No. 16-28. Available at SSRN: https://ssrn.com/abstract=2823605 or http://dx.doi.org/10.2139/ssrn.2823605

Ryan Bubb (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
(212)992-8871 (Phone)

HOME PAGE: http://https://its.law.nyu.edu/facultyprofiles/profile.cfm?personID=34148

Patrick L. Warren

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
290
Abstract Views
1,720
rank
107,029
PlumX Metrics