Working Paper: NBER ID: w18488
Authors: Robert L. Clark; Melinda S. Morrill; David Vanderweide
Abstract: Studies examining pension distribution choices have found that the tendency of private-sector workers is to select lump sum distributions instead of life annuities. In the public sector, defined benefit pensions usually offer lump sum distributions equal to employee contributions, not the present value of the annuity. Using administrative data from the North Carolina state and local government retirement systems, we find that over two-thirds of public sector workers under age 50 separating prior to retirement from public plans in North Carolina left their accounts open and did not request a cash distribution from the pension system within one year of separation. Furthermore, the evidence suggests many separating workers, particularly those with short tenure, may be forgoing important benefits due to lack of knowledge, understanding, or accessibility of benefits. In contrast to prior research in the private sector, we find no evidence of a bias toward cash distributions for public employees in North Carolina.
Keywords: No keywords provided
JEL Codes: H75; J45
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial literacy (G53) | decision to maintain pension accounts (H55) |
| health insurance eligibility (I13) | decision to maintain pension accounts (H55) |
| expectation of returning to public employment (J68) | decision to maintain pension accounts (H55) |
| decision to maintain pension accounts (H55) | forgoing important benefits (J17) |
| requesting a lump sum distribution (G35) | preference for immediate cash (E41) |
| lack of knowledge (D83) | forgoing important benefits (J17) |