An analysis of pension trends in the provision of retirement income: From defined benefit to defined contribution plans

The current trend in employer-pensions from defined benefit plans toward defined contribution plans has raised the concern that retirement income from private pensions becomes less certain. Most of the previous research used the change in the number of plans and/or the number of participants to measure pension trends. These measurements cannot reflect the effects of the trend away from defined benefit plans on the welfare of workers in terms of retirement income. This dissertation overcomes the limitations of previous studies by using a new measurement--"the amount of employers' pension costs." Moreover, by linking the IRS Form 5500 data with Compustat data, this dissertation also examines the relationship between the decision-making of employer's pension costs and a firm's financial factors.;From the employer's pension costs perspective, this dissertation found that 18.3 percent of retirement assets in primary plans were moved from defined benefit to defined contribution plans from 1985 to 1993. In addition, the empirical results show the changes in a firm's financial status in general did not relate to the decision-making of employer's pension costs. As to the pension revision activities, the regression results support internal financial borrowing theory. Moreover, this dissertation finds recent changes in the labor and business market have made employers more reluctant to offer defined benefit plans.