Pension Plan Choice in the Public Sector: The Case of Michigan State Employees

In 1997, the State of Michigan closed its DB pension plan to new state employees. New employees are automatically enrolled in a 401(k) plan with a mandatory state contribution. Existing employees chose between staying in the DB plan, or transferring the present value of their vested pension benefits...

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Bibliographic Details
Published in:National tax journal 2004-06, Vol.57 (2), p.329-339
Main Author: Papke, Leslie E.
Format: Article
Language:English
Subjects:
Age
Beneficiaries
Cost of living adjustments
Deferred compensation
Employee pension plans
Employment
Fair value
FORUM: Pensions
Pension plans
Present value
Private sector
Privatization
Public pensions
Public sector
Retirees
Retirement
Retirement benefits
Retirement plans
State employees
Studies
Vested benefits
Workers
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Summary:In 1997, the State of Michigan closed its DB pension plan to new state employees. New employees are automatically enrolled in a 401(k) plan with a mandatory state contribution. Existing employees chose between staying in the DB plan, or transferring the present value of their vested pension benefits to a DC plan. This paper surveys the event and analyzes the choice made by corrections workers, about 25 percent of Michigan public employment. An analysis of the switch to individual accounts may inform Federal estimates of take-up rates in a possible privatization of Social Security.
ISSN:0028-0283
1944-7477
DOI:10.17310/ntj.2004.2.10