Journal of Financial Services Research

, Volume 31, Issue 1, pp 1–32 | Cite as

Defined Contribution Pension Plans: Determinants of Participation and Contributions Rates



Records of 793,794 employees eligible to participate in 647 defined contribution pension plans are studied. About 71% of them choose to participate in the plans, and of the participants, 12% choose to contribute the maximum allowed, $10,500. The main findings are (other things equal) (1) participation rates, contributions and (most remarkably) savings rates increase with compensation; on average, a $10,000 increase in compensation is associated with a 3.7% higher participation probability and $900 higher contribution; (2) women’s participation probability is 6.5% higher than men’s and they contribute almost $500 more than men; (3) participation probabilities are similar for employees covered and not covered by DB plans, but those covered by DB plans contribute more to the DC plans; (4) the availability of a match by the employer increases employees’ participation and contributions; the effect is strongest for low-income employees; (v) participation rates, especially among low-income employees, are higher when company stock is an investable fund.


401(k) plans defined contribution 



The authors are grateful to Steve Utkus and Gary Mottola from Vanguard® Center for Retirement Research. They made the data available and provided us with constructive comments throughout the process. We also thank Pierre Azoulay, Geert Bakeart, Charlie Calomiris, Sarah Holden, Brigitte Madrian, Jim Powell, Thomas Steinberger, Ed Vytlacil, Elke Weber, Steve Zeldes, an anonymous referee, and seminar participants at Columbia, Rice, Wharton Pension Research Council, New York Federal Reserve Bank, CEPR workshop on Financing Retirement in Europe, and Wharton Workshop on Household Portfolio Choice and Financial Decision Making for their helpful comments.


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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Finance and Economics DivisionColumbia Business SchoolNew YorkUSA
  2. 2.Management DivisionColumbia Business SchoolNew YorkUSA

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