Scale Economies in Union Pension Plan Administration: 1981–1993

We confirm previous findings that as the pension plan size increases, administrative costs per participant and asset fall after controlling for the proportion of retirees in a plan. However, we question the inference that the high costs of administering small plans partly explains why small firms generally do not sponsor pension plans. This study uses Internal Revenue Service annual data to compare the administrative costs of Taft-Hartley plans from 1981 to 1993. Centralization may save costs but also may inhibit formation. Union plans are naturally small; they form at the local level.