The Influence of Plan Demographics on Contribution Behavior of 401(k) Participants

This article examines the influence of plan demographics, which is defined as the salary and tenure composition of a plan, on contribution behavior of 401(k) participants. Results using a large sample of 401(k) plans show that plan demographics influence participant contribution rates directly or through interaction with individual demographic characteristics. A participant's contribution rate can be varied by 1.6–3.0 percentage points for each age between 25 and 64, depending on what plan demographics she is exposed to. In addition, for the decision to contribute the maximum allowed amount, plan demographics significantly interact with individual demographic characteristics.     

董事长个人特征、代理成本与营收计划的自愿披露——来自沪深上市公司的经验证据

本文基于高层梯队理论和代理理论,研究了董事长个人特征和代理成本对公司营收计划自愿披露的影响。以2008—2010年度A股上市公司为样本,研究发现,公司董事长年龄、性别以及股权代理成本与营收计划自愿披露相关。董事长年龄越大、董事长为女性以及股权代理成本越小的公司,其自愿披露营收计划的可能性越大。研究还发现公司规模、董事长和总经理两职合一以及交叉上市对公司营收计划自愿披露也有显著影响。本文的研究丰富了相关文献,特别是为从管理者特征方面来解释我国上市公司的自愿披露行为提供了经验证据。     

Beliefs and actions: expectations and savings decisions by older Americans

To understand the interaction of savings behavior, pension fund participation and expectations of retirement well being, we ask two questions. Are expected pension benefits a substitute for accumulated savings in replacing preretirement income? Are individuals’ expectations concerning their retirement standard of living realistic based on their accumulated savings and pension plan participation? First-wave data from the Health and Retirement Study (HRS) are analyzed using a probit regression. The results are consistent with the idea that pension benefits are substitutes for saving and that accumulated savings have a significant impact on the expected standard of living but pension plan participation does not.     

Florida's Pension Election: From DB to DC and Back

During the year 2002, the State of Florida's 600,000 public employees were given the choice of converting their traditional defined benefit (DB) pension plan into an individual‐account defined contribution (DC) plan with full control over asset allocation and investment decisions. To mitigate some of the risk and uncertainty in the decision, the State granted each employee electing the DC plan an additional option to switch back (i.e., change their mind once) at any point prior to retirement. This option has been labeled the 2nd election by the State and the cost of reentry is fixed at the accumulated benefit obligation of their pension entitlement, which is the present value of the life annuity. Our article presents some original analytic insights relating to the optimal time and financial value of this unique 2nd election. Although our model is deterministic in nature, we believe that it provides a number of intuitive insights that are quite robust. Our results can be contrasted with Lachance, Mitchell, and Smetters (2003) . We estimate that the increase in retirement wealth that arises from having the 2nd election is equivalent to at most 30 percent in future value, and only when utilized optimally. Furthermore, for most State employees above the age of 45, the 2nd election has little economic value because the DB plan dominates the DC plan from day one. Of course, it remains to be seen what percent of Florida's 600,000 employees will elect to behave rationally with their newfound pension autonomy.     

ICD-10: from assessment to remediation to strategic opportunity

Healthcare finance teams should perform an enterprisewide assessment to determine what ICD-10 means to their organization, strategically, operationally, and financially. CFOs should strategically evaluate the impact of ICD-10 on the organization's entire financial operation. Organizations should have a contingency plan in place across all processes.     

Exploratory analyses of dividend reinvestment plans and some comparisons

In this paper, we explore salient features of dividend reinvestment plans (DRIPs), analyze their financial peculiarities and search for the differences between firms that offer DRIPs and those that do not. As more than 1200 firms currently offer the plan, an understanding of why these plans differ in a variety of cost/benefit structures and, perhaps more importantly, what separates these firms from No-DRIP firms is crucial for both investors and adaptors of the plan. Our research suggests that—out of 17 financial and accounting variables—DRIP firms differ from No-DRIP firms in only three variables. In spite of this, we conclude that there is much to learn about the motivation for DRIPs.     

An Analysis of the Financing Decisions of REITs: The Role of Market Timing and Target Leverage

This paper examines the role of capital market conditions and target leverage on the marginal financing decisions of Real Estate Investment Trusts (REITs), which include both capital raising and capital reduction activities. We investigate the relevance of a hybrid hypothesis whereby REITs have target leverage, but they also choose and time their marginal financing decisions according to the capital market conditions. The empirical results suggest that target leverage behavior plays a secondary role to market timing behavior in the financing decisions of REITs. In particular, we find strong and consistent evidence that REITs exhibit market timing behavior in terms of when and what type of capital to issue or reduce. Such market timing practices, motivated by attempts to take advantage of capital market conditions, may shift the firms away from their target leverage. However, we observe that in the long run, most REITs do move their capital structure towards the target debt level.     

401(k) Investment Decisions and Social Security Reform

Abstract

This paper uses the 1995 Survey of Consumer Finances to show that 401(k) participants with an underlying defined benefit plan are more likely to invest in equities than are participants whose 401(k) is their primary plan. This suggests that workers with a guaranteed source of retirement income are more likely to invest their other retirement assets more aggressively. Removing this guarantee might result in more conservative investment. Therefore, using current 401(k) asset allocation behavior to project income under a Social Security individual account system with reduced guaranteed benefits could overstate returns to these accounts, thus overstating their attractiveness relative to the current system.     

The Selection and Termination of Investment Management Firms by Plan Sponsors

We examine the selection and termination of investment management firms by 3,400 plan sponsors between 1994 and 2003. Plan sponsors hire investment managers after large positive excess returns but this return-chasing behavior does not deliver positive excess returns thereafter. Investment managers are terminated for a variety of reasons, including but not limited to underperformance. Excess returns after terminations are typically indistinguishable from zero but in some cases positive. In a sample of round-trip firing and hiring decisions, we find that if plan sponsors had stayed with fired investment managers, their excess returns would be no different from those delivered by newly hired managers. We uncover significant variation in pre- and post-hiring and firing returns that is related to plan sponsor characteristics.     

Directional Preferences, Information Processing, and Investors' Forecasts of Earnings

This paper investigates the effects of preferences on judgments in an investing context, where investors should be motivated to interpret information objectively, yet have clear preferences with respect to what the information they are evaluating conveys (i.e., a gain or a loss on their investment). The results of the experiment are consistent with theories of motivated reasoning that predict when and in what manner directional preferences affect how information is processed. Specifically, investors are motivated to agree unthinkingly with information that suggests they might make money on their investment, but disagree with information that suggests they might lose money. In disagreeing, long investors expect earnings to be relatively high and short investors expect earnings to be relatively low. These results have implications not only for understanding investor behavior, but also for understanding the biased behavior of market participants who face conflicts of interest, such as analysts, managers, and auditors, by providing direct evidence that such behavior can arise for purely psychological reasons.     

Cost uncertainty and budget overspending: A safety-first perspective

In this study we model a cost center manager's decision about how to achieve a required level of output. The spending plan that the manager adopts is expected to result in successful performance, but at an uncertain cost. The uncertainty associated with the spending plan is inversely related to the expected cost. The analysis presented in this article suggests that a manager who exhibits Safety-First behavior and wishes to avoid large budget deviations is more likely to exceed what he or she perceives to be the overspending limit rather than the underspending limit. That manager will tend to incur costs in excess of the budget. This mathematical result has an intuitive appeal; a manager is willing to pay a certain “risk premium” to avoid the risk of large budget deviations and accompanying adverse consequences. This result has implications for both performance evaluation and budget setting, particularly in the public sector. Under the circumstances that we describe, using budgets in evaluating managerial performance may be misleading. Another application of our study relates to the “budget creep” phenomenon and how, under particular circumstances, its size can be reduced.     

Building a culture of personal benefits responsibility

Successfully having employees take personal responsibility for their benefits plans requires going beyond the rapid rollout of new benefit plan designs; it requires employers to invest in understanding the complexity of their workforce. This article reviews the evolution of benefit plans and what has arisen as the current state of employee benefits. It then discusses steps employers can take to build a successful total benefit strategy that recognizes the importance of the emerging workforce's racial, ethnic and cultural diversity.     

Health care consumerism: engaging the real buyers--employees

Many employers have begun moving toward health care consumerism strategies designed to encourage employees to take more responsibility for their health care and the cost of that care. Recent surveys suggest ways employers can ensure their consumerism strategies succeed in engaging employees and, ultimately, encourage employees to change their behavior. This article describes what those surveys reveal about employer and employee perspectives on consumerism and suggests steps employers can take to align their interests with those of their employees in order to manage the demand for and use of health care.     

Assessing health plan quality

Health plan accreditation and report cards represent the beginning of a rapidly evolving information flow that impacts all stakeholders within the health care system. By understanding what information is available--and its limitations--stakeholders can work together to promote improved health plan quality.     

“The Current State of Genetic Testing: An Insurance Industry Perspective on the Rush to Legislate”, Charles S. Jones,Jr., January, 1999

Abstract

We propose a new type of retirement plan, aimed at achieving a compromise between stability in cost for the plan sponsor and guaranteed accumulation for the participants. The behavior of the plan is compared with that of a money purchase plan for both deterministic and stochastic investment scenarios. The proposed plan is shown to provide more stable and predictable benefits than a money purchase plan. Obstacles to the establishment of such a plan, from the perspective of U.S. pensions legislation, are considered.     

Fearful asymmetry: The consumption of accounting signs in the Algoma Steel pension bailout

This paper examines the role of accounting in society by looking at the consumption of accounting signs during the financial restructuring of a corporation. The paper builds upon insights from prior research on accounting as simulacrum and hyperreality. It examines how accounting numbers serve as reconfigurable signs that construct appropriate “crises”, motivate government intervention, and marshal stakeholders towards solutions. The incident at the heart of this study is the 2001 bailout of the Algoma Steel pension plan by the Ontario government. The incident demonstrates how accounting technologies are required both for the production of accounting signs and for their consumption. The paper asks how the production and consumption of accounting signs is different from that of other communication signs, what role consumers of accounting signs play in determining their meaning, and what difference this makes in how corporate pension plans are protected by government. It concludes that the structures and mechanisms surrounding the consumption of accounting signs enable different stakeholders to influence the production of meaning at the moment when accounting signs are consumed, changing the way that risk and wealth are redistributed, and shaping government intervention.     

风险分散与中国混合型基本养老保险制度改革研究

本文从参保人养老投资风险分散角度研究混合型基本养老保险制度设计。通过构建一个两期消费模型,综合考虑参保人所面临的人口结构、工资增长率、养老基金投资等风险因素,本文研究了混合型基本养老保险制度中现收现付制与基金积累制的最优比例,并利用中国数据进行了测算与敏感性分析。研究发现:引入小规模个人账户基金积累制可以分散人口老龄化给现收现付制所带来的风险,中国实行混合型基本养老保险制度有其合理性;但如果要维持40%～45%的养老金替代率水平,中国基本养老保险制度的财务可持续性会面临较大挑战。     

Eager sellers and stony buyers: understanding the psychology of new-product adoption

Companies that introduce new innovations are the most likely to flourish, so they spend billions of dollars making better products. But studies show that new innovations fail at a staggering rate. While many blame these misses on lackluster products, the reality isn't so simple. The goods that consumers dismiss often do offer improvements over existing ones. So why don't people purchase them? And why do companies keep peddling products that buyers are likely to reject? The answer, says the author, can be found in the brain. New products force consumers to change their behavior, and that has a psychological cost. Many products fail because people irrationally over-value the benefits of the goods they own over those they don't possess. Executives, meanwhile, overvalue their own innovations. This leads to a serious clash. Studies show, in fact, that there is a mismatch of nine to one, or 9x, between what innovators think consumers want and what consumers truly desire. Fortunately, companies can overcome this disconnect. To start, they can determine where their products fall in a matrix with four categories: easy sells, sure failures, long hauls, and smash hits. Each has a different ratio of product improvement to change required from the consumer. Once businesses know where their products fit into this grid, they can manage the resistance to change. For some innovations, major behavior change is a given. In those cases, companies can either wait for consumers to warm to the product, make the improvement so great that buyers get past their apprehension, or try to eliminate the incumbent product. Firms can also try to minimize buyer resistance by making products that are compatible with incumbent goods, seeking out those who are not yet users of the existing product, or finding true believers.     

上市公司董事会特征与违规行为

上市公司独立董事的规模、董事会规模和董事会成员的报酬对于上市公司的违规行为起着显著的约束作用。董事长与总经理两职部分分离的治理形式,并不是影响上市公司违规行为的重要因素。改变中国上市公司的"一股独大"的股权结构,规避中国上市公司违规行为现状而言,更为重要。应该适当增加董事的持股比例,这样才能充分激励董事了解和监督公司运营,从而约束管理层的违规行为。     

What benefits managers should know about the Mental Health Parity Act of 1996

In consideration of the statutory requirements of the Mental Health Parity Act of 1996, the author stresses that benefits managers should consider three issues. First, the financial impact of the act should be minimal for most plans. Second, minimal compliance may require more extensive changes to the plan than originally anticipated. Finally, the process of compliance offers opportunity to examine broader issues of mental health coverage. The article explains what the act does and does not require. The article concludes with a presentation of a comparative analysis of the cost impact of the act on five prototype plan designs.