Wharton Pension Research Council Working Papers

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Working Paper

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This paper explores why plan sponsors design their 401(k) plans the way they do. Employing a unique, rich dataset of over five hundred 401(k) plans, we find that these plans are principally a form of tax-motivated compensation under the restriction of federal non-discrimination rules. In other words, to appeal to better-paid workers, employers offer more generous monetary and non-monetary plan design features. At the same time, complex federal tax rules restrict pay discrimination in favor of the highly-paid employees.


The published version of this Working Paper may be found in the 2006 publication: Restructuring Retirement Risks.

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Copyright/Permission Statement

©2005 Pension Research Council of the Wharton School of the University of Pennsylvania. All Rights Reserved.


The authors thank John Ameriks, Sarah Holden, and Lori Lucas for helpful comments. They are also grateful to Vanguard for the provision of recordkeeping data under restricted access conditions; to the Pension Research Council at the Wharton School and the Bradley Foundation for research support. This research is part of the NBER programs on Aging and Labor Economics. Opinions expressed herein are those of the authors alone, and not those of The Wharton School, Vanguard, or any other institution which whom the authors may be affiliated.

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Date Posted: 30 August 2019