Are You Exploiting Naïve Myopic Workers With That Employer Match?
Over the years, I’ve seen some convoluted ways to rationalize undermining the tax preferences of workplace retirement plans and substituting government tax credits — but a new one just may take the cake. “ A Behavioral Contract Theory Perspective on Retirement Savings ,” authored by Ryan Bubb and Patrick Corrigan from the New York University School of Law and Patrick L. Warren from Clemson University’s John E. Walker Department of Economics, starts off by assuming that workers are rational, though perhaps not rational in the way you or I might consider to be rational. However, I’ll accept as logical their assertion that rational workers will prefer saving through an employer-provided plan, rather than accepting a job that does not provide such a plan. They also claim to provide an analysis that “provides novel explanations for the use of low default contribution rates in automatic enrollment plans, the shift away from defined benefit annuities toward lump sum distributions in defin...