View Research by Author - Mauricio Soto

Citation URL: http://www.urban.org/MauricioSoto

How employers respond to automatic pension enrollment is important to the debate over how to increase retirement savings for all Americans. We recently completed a study showing that employers with autoenrollment have lower match rates than those without it, suggesting that employers may be trying to offset their higher costs. In contrast, the Employee Benefit Research Institute finds that employers with automatic enrollment have increased match rates since 2005. The two studies measure different concepts and use different time frames. A large sample of 401(k) plans reporting match rates before and after autoenrollment is needed to fully understand employer responses.

This policy brief summarizes the findings of a larger report on potential tax incentives to increase charitable giving in Puerto Rico. Improved incentives for private charitable giving would strengthen nonprofit organizations in Puerto Rico. Taxpayers may choose between a 100 percent deduction for contributions over 3 percent of adjusted gross income (AGI) or a 33 percent deduction for contributions with no floor. Deductions may not exceed 15 percent of AGI. Removing the 15 percent ceiling would be a relatively cost effective way of encouraging more giving.

Improved incentives for private charitable giving would strengthen nonprofit organizations in Puerto Rico. Puerto Rico's income tax allows itemizers to deduct charitable contributions, but with limits. Taxpayers may choose between a 100 percent deduction for contributions over 3 percent of adjusted gross income (AGI) or a 33 percent deduction for contributions with no floor. Deductions may not exceed 15 percent of AGI. Removing the 15 percent ceiling would be a relatively cost effective way of encouraging more giving. Reducing the 3 percent floor, though generating less additional giving per dollar of revenue loss, would encourage broader participation.

We use the Health and Retirement Study to investigate household assets at older ages. We find a notable increase in the net worth of older households between 1998 and 2006, with most of the growth due to housing. The age pattern of asset accumulation and decumulation varies considerably by income. High-income seniors increase assets at older ages. Middle-income seniors reduce assets in retirement, but at a rate that will not deplete assets within their expected life. Low-income seniors spend their financial assets at a rate that will mostly deplete them, leaving only Social Security and defined-benefit pensions at older ages.

Many employers match employee contributions to 401(k) plans. However, the employer cost of continuing this practice may increase rapidly as trends towards automatic enrollment boost employee participation. This paper examines the relationship between employer matching behavior and automatic enrollment. Using a sample of large 401(k) plans, we find that match rates are about 7 percentage points lower among firms with automatic enrollment than among those without automatic enrollment, even controlling for firm characteristics. So while autoenrollment increases the number of workers participating in private pensions, our findings suggest it might also reduce the level of pension contributions.

Automatic enrollment, a 401(k) feature that enrolls employees as soon as they become eligible, is growing in popularity because it has been shown to significantly increase pension participation rates. However, higher participation rates increase costs for employers that match employee contributions. This brief evaluates the extent to which firms adjust their 401(k) contributions to offset the higher costs associated with automatic enrollment. We find that employer match rates are 7 percentage points lower among firms with autoenrollment than among those without it, suggesting that automatic enrollment may not promote retirement savings as effectively as some advocates have claimed.

The stock market lost 56 percent of its value between September 30, 2007, and March 9, 2009. These losses reduced the retirement savings of American households. Recently, however, a good portion of these losses has been reversed. Equities gained 53 percent between March 9, 2009 and August 31, 2009.

As one of the fastest growing segments of the older population, Hispanics could become an important target for employers trying to attract and retain older workers. Older Hispanics participate in the labor force at relatively high rates and generally appear to be at least as healthy as non-Hispanic whites and healthier than blacks. Many, however, face substantial challenges in the workplace. They earn low wages and few benefits, and tend to work in physically demanding jobs that are often difficult to maintain into later life. Various policy reforms could boost older Hispanics' employment and earnings. Published by AARP (see link below.)

The stock market gained 35 percent between March 9, 2009 and May 5, 2009. For those who held on to their equities, these gains reversed some of the massive losses experienced since September 2007. This fact sheet examines the impact of the ongoing economic turmoil on older households and presents estimates of the retirement account losses to date.

The stock market lost 56 percent of its value between September 30, 2007 and March 6, 2009, a roughly $13 trillion drop. The loss has reduced the retirement savings of many Americans, particularly older adults. This fact sheet examines the impact of the ongoing economic turmoil on older households and presents estimates of the retirement account losses to date.

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