Defined Contribution Pension Plans: Determinants of
Participation and Contribution Rates
Gur Huberman, Sheena Iyengar and Wei Jiang
ABSTRACT
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 allowance, $10,500. The main findings are (other than equal)
(i) 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;
(ii) women’s participation probability is 6.5% higher than men’s and they
contribute almost $500 more then men;
(iii) particiapation probabilities are similar for employees covered and not
covered by DB plans, but those covered by DB plans contribute more to DC plans;
(iv) 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.