Federal Tax Policy, Employer Matching, and 401(K) Saving: Evidence from Hrs W-2 Records

Posted: 17 Apr 2003

See all articles by Christopher R. Cunningham

Christopher R. Cunningham

Syracuse University - Center for Policy Research

Gary V. Engelhardt

Syracuse University - Center for Policy Research; Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

We use panel data from W-2 records for households in the Health and Retirement Study (HRS) to examine the responsiveness of 401(k) saving to taxation, employer matching, and lifecycle factors. The limit on the tax deductibility of IRA contributions enacted in the Tax Reform Act of 1986 appears to have raised 401(k) saving by 6 percent. Individuals eligible for employer matching contribute substantially more, but this result is not robust once job and firm characteristics are taken into account. Alternative pension coverage greatly reduces 401(k) saving, whereas the ability to direct the investment of funds is associated with higher saving.

Suggested Citation

Cunningham, Christopher R. and Engelhardt, Gary V., Federal Tax Policy, Employer Matching, and 401(K) Saving: Evidence from Hrs W-2 Records. Available at SSRN: https://ssrn.com/abstract=368166

Christopher R. Cunningham

Syracuse University - Center for Policy Research ( email )

426 Eggers Hall
Syracuse, NY 13244
United States

Gary V. Engelhardt (Contact Author)

Syracuse University - Center for Policy Research ( email )

426 Eggers Hall
Syracuse, NY 13244
United States
315-443-4598 (Phone)
315-443-1081 (Fax)

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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