a1 University of Colorado Denver
This study uses a unique data set of retiree characteristics and salary histories for administrators, teachers, and non-professional employees of the Denver Public School Retirement System (DPSRS) to analyze surplus deferred compensation for DPSRS and four state K-12 defined benefit pension plans. We find sizable levels of surplus deferred compensation for each plan, with significant differences across plans, job classes, and age groups. Across plans, differences in cost of living allowances impact the expected present value of retirement benefits more than benefit table differences when controlling for each respective factor. Somewhat surprisingly, the plans in our study with the largest present value of future benefits had lower employee contribution rates. Pension wealth for reduced benefits showed larger wealth accrual at younger ages than full, unreduced benefits, and younger cohorts starting work at an earlier age received significantly higher surplus deferred compensation.
(Online publication November 22 2010)
c1 Correspondence address: The Business School, University of Colorado Denver, Campus Box 165, P.O. Box 173364, Denver, CO 80217-3364, USA.
The authors thank Xi Wan for her excellent research assistance and Karen Holden of DPSRS for providing data and for explaining aspects of DPSRS retirement benefits. We thank Mr Richard Greer (FSA and MAAA) of Aegon Corporation for providing samples of net interest rates and contract values. We also thank the Colorado Public Employee Retirement Association (PERA) for providing important data (mortality table, guaranteed rates, portfolio returns, and annual reports) and for explaining aspects of PERA retirement benefits. We thank the referees and thank Sebastian Lang and other MFA 2010 session participants and University of Colorado Denver 2010 Finance Seminar participants for helpful comments that contributed to the quality of the paper.