Promoting work at older ages: the role of hybrid pension plans in an aging population 1
RICHARD W. JOHNSON a1 and EUGENE STEUERLE a1

a1 The Urban Institute, Washington, D.C., USA (email: rjohnson@ui.urban.org)

Abstract

Employers are beginning to search for ways to elicit more labor supply from older adults as the population ages, the ability to work in later life increases, and younger workers become relatively scarce. Many employers are turning to hybrid pension plans, such as cash balance plans and pension equity plans. Whereas traditional defined benefit plans often subsidize workers who retire early and penalize those who remain at work beyond the plan's retirement age, most hybrid plans reward work at older ages. This paper documents the impact of population aging on the labor market and changes over time in work capacity at older ages. It then shows how movement toward hybrid pension plans, among other types of private and public retirement plan reforms and redesigns, can be used to increase work incentives for older adults.

Footnotes

1 The authors are grateful to Watson Wyatt Worldwide for financial support, and to Adam Carasso and Meghan Bishop of the Urban Institute for updating the estimates presented in Figure 8. The opinions expressed here are those of the authors and do not necessarily reflect the views of Watson Wyatt or the Urban Institute, its board, or its sponsors.