Chapter <b>Dimensions of 401(k) Plan Design</b>

Olivia S. Mitchell, Stephen P. Utkus and Tongxuan (Stella) Yang

in Restructuring Retirement Risks

Published in print August 2006 | ISBN: 9780199204656
Published online September 2006 | e-ISBN: 9780191603822 | DOI:
Chapter Dimensions of 401(k) Plan Design

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This chapter explores why employers or plan sponsors design their 401(k) plans the way they do. Drawing on a rich dataset of over five hundred 401(k) plans, it shows 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.

Keywords: pension regulation; taxation; defined contribution; investment choice; income

Chapter.  7126 words.  Illustrated.

Subjects: Financial Markets

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