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The Costs of Defined Benefit Pension Plans and Firm Adjustments
Articles and Chapters
  • Burt S Barnow, United States Department of Labor
  • Ronald G Ehrenberg, Cornell University
Publication Date

[Excerpt] While it is obvious that the costs of term life insurance vary directly with age, it is less obvious how employers' contributions to pension funds, which comprise a major share of nonwage compensation, vary. As such, we focus in this paper on the most common variant of pension plans and demonstrate how an employer's cost of fully funding a plan varies with the age and service characteristics of his work force. This cost, as a percent of annual salary, is seen to increase with employees' ages and, in some cases, years of service. This variation has important implications for the level and shape of life-cycle earnings profiles, for labor turnover, and for the likely impact of pension reform legislation, such as the Employees Retirement Income Security Act of 1974 (ERISA), on the well-being of workers. These implications are discussed in this paper.


Suggested Citation
Barnow, B. S. & Ehrenberg, R. G. (1979). The costs of defined benefit pension plans and firm adjustments [Electronic version]. Quarterly Journal of Economics 93(4), 523-540.

Required Publisher Statement
© Massachusetts Institute of Technology Press. Reprinted with permission. All rights reserved.

Citation Information
Burt S Barnow and Ronald G Ehrenberg. "The Costs of Defined Benefit Pension Plans and Firm Adjustments" (1979)
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