New papers from the Social Science Research Network

SOCIAL SECURITY, PENSIONS & RETIREMENT INCOME eJOURNAL

"Portability of Pension, Health, and Other Social Benefits: Facts, Concepts, and Issues"
CESifo Working Paper Series No. 4002

ROBERT HOLZMANN, University of Malaya, Institute for the Study of Labor (IZA), CESifo (Center for Economic Studies and Ifo Institute for Economic Research), World Bank
Email: robert.holzmann@um.edu.my
JOHANNES KOETTL, World Bank - Human Development Sector, Institute for the Study of Labor (IZA)
Email: johannes.koettl@gmx.at

Portability of social benefits across professions and countries is an increasing concern for individuals and policy makers. Lacking or incomplete transfers of acquired social rights are feared to negatively impact individual labor market decisions as well as capacity to address social risks with consequences for economic and social outcomes. The paper gives a fresh and provocative look on the international perspective of the topic that has so far been dominated by social policy lawyers working within the framework of bilateral agreements; the input by economists has been very limited. It offers an analytical framework for portability analysis that suggests separating the risk pooling, (implicit or actual) pre-funding, and redistributive elements in the benefit design, and explores the proposed alternative approach for pensions and health care benefits. This promising approach may serve both as a substitute and complement to bi- and multilateral agreements.

"An Overview of American Indians and Alaska Natives in the Context of Social Security and Supplemental Security Income"
Social Security Bulletin 72(4): 1-10, 2012

NOLAN SMITH-KAPROSY, affiliation not provided to SSRN
Email: nolan.smith.kaprosy@gmail.com
PATRICIA P. MARTIN, Government of the United States of America - Social Security Administration
Email: Patricia.P.Martin@ssa.gov
KEVIN WHITMAN, U.S. Social Security Administration
Email: Kevin.Whitman@ssa.gov

This article examines the economic security of the American Indian and Alaska Native (AIAN) population by exploring AIAN receipt of Social Security benefits and Supplemental Security Income (SSI). This analysis uses data from the 2005–2009 American Community Survey Public Use Microdata Sample, which provides a larger AIAN sample size than many other sources, thereby enabling more reliable estimates. We find that adult AIANs are less likely to receive Social Security benefits and more likely to receive SSI than are adults in the total population. In both programs, median benefit amounts are lower for AIAN recipients than for recipients in the total population.

"Holding Out or Opting Out? Deciding between Retirement and Disability Applications in Recessions"
Center for Retirement Research at Boston College, CRR WP 2012-26

MATTHEW S. RUTLEDGE, Boston College
Email: rutledma@umich.edu

Workers over age 55 with chronic health conditions must choose between applying for Social Security Disability Insurance (SSDI) benefits or continuing to work until their Social Security retirement benefits become available. Previous research has investigated the influence of macroeconomic conditions on disability application and, separately, on retirement claiming. This project uses data from the Survey of Income and Program Participation Gold Standard File to determine whether there is a relationship between national and state unemployment rates and disability applications, taking into account the current or future receipt of Social Security retirement benefits. First, reduced-form estimates indicate that retirement beneficiaries are more likely to apply for SSDI as unemployment increases – and, conversely, eligible individuals who have not yet claimed benefits are less likely to apply when unemployment rises. But after accounting for unobserved characteristics associated with both the decision to apply for disability insurance and Social Security benefits, individuals are no more likely to apply for disability benefits when unemployment is high. Second, we find that the probability of SSDI application among individuals age 55-61 is unrelated to macroeconomic conditions and unrelated to proximity to one’s 62nd birthday. These results suggest that, unlike prime-age adults, the decision among older individuals to apply for disability is based primarily on health, and not financial incentives.

"Mismeasurement of Pensions Before and after Retirement: The Mystery of the Disappearing Pensions with Implications for the Importance of Social Security as a Source of Retirement Support"
NBER Working Paper No. w18542

ALAN L. GUSTMAN, Dartmouth College - Department of Economics, National Bureau of Economic Research (NBER)
Email: Alan.L.Gustman@dartmouth.edu
THOMAS L. STEINMEIER, Texas Tech University - Department of Economics and Geography
Email: thomas.steinmeier@ttu.edu
NAHID TABATABAI, Dartmouth College - Department of Economics
Email: nahid.tabatabai@dartmouth.edu

A review of the literature suggests that when pension values are measured by the wealth equivalent of promised DB pension benefits and DC balances for those approaching retirement, pensions account for more support in retirement than is suggested when their contribution is measured by incomes received directly from pension plans by those who have already retired. Estimates from the Health and Retirement Study (HRS) for respondents in their early fifties suggest that pension wealth is about 86 percent as valuable as Social Security wealth. In data from the Current Population Survey (CPS), for members of the same cohort, measured when they are 65 to 69, pension incomes are about 56 percent as valuable as incomes from Social Security. Our empirical analysis uses data from the Health and Retirement Study to examine the reasons for these differences in the contributions of pensions as measured in income and wealth data.
A number of factors cause the contribution of pensions to be understated in retirement income data, especially data from the CPS. One factor is a difference in methodology between surveys affecting what is included in pension income, especially in the CPS, which ignores irregular payments from pensions. In CPS data on incomes of those ages 64 to 69 in 2006, pension values are 59 percent of the value of Social Security. For the same cohort, in HRS data, the pension value is 67 percent of the value of Social Security benefits.

Some pension wealth “disappears” at retirement because respondents change their pension into other forms that are not counted as pension income in surveys of income. Altogether, 16 percent of pension wealth is transformed into some other form at the time of disposition. For those who had a defined benefit pension just before termination, the dominant plan type for current retirees, at termination 12 percent of the benefit was transformed into a state that would not count as pension income after retirement.
For those who receive benefits soon after termination, there is a 3.5 percent reduction in DB pension value at termination compared to the year before termination. One reason may be the form of annuitization that is chosen.
A series of caveats notwithstanding, the bottom line is that CPS data on pension incomes received in retirement understates the full contribution pensions make to supporting retirees.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

"Corporate Governance and Pension Fund Performance"
Contemporary Economics, Vol. 6, No. 1, pp. 14-44, 2012

OSKAR KOWALEWSKI, Kozminski University, Warsaw School of Economics - World Economy Research Institute
Email: okowale@kozminski.edu.pl

This study provides new evidence on the impact of governance on the performance of privately defined contribution pension plans. Using a hand collected data set on governance factors, the study shows that the external and internal governance mechanisms in pension plans are weak. One explanation for this weakness is the potential conflict between the pension beneficiaries and the fund’s owner, which depends on who bears the investment risk in the pension plan. Hence, different governance factors are found to be important for pension fund return on invested assets and also for its economic performance. Consequently, the overall policy conclusion is that more focus should be put on the governance of the pension funds, taking into account the different interests of the beneficiaries and owners as it may determine their performance.