Some contend the US labor market will fail to adapt smoothly to an aging workforce,
whereas others argue that employee pensions can and will play an important role in helping
companies induce desired turnover patterns. This paper undertakes a longitudinal examination of
pension retirement incentives in several dozen plans observed between about 1960to 1980.
The plans under study instituted many changes over this period, several of which enhanced
the financial payoff to early retirement. These alterations included increases in benefit levels,
reductions in early, normal and mandatory retirement ages, and cuts in the age at which pension
present values peak (with retirement after that age penalized). We also find that simple indicators
of pension plans' structural features (e.g. the plan's early retirement age) do not adequately
summarize the complex financial incentives inherent in pensions, so that most of our attention is
directed to analysis of financial benefit level measures.
Three major explanations for observed pension outcomes are evaluated empirically. Of
special policy interest is an evaluation of pension responses to changes in Social Security benefit
rules. Additionally, key differences in behavior are discovered between single employer and multiemployer
pension plans. We conclude that pension plan behavior is systematically related to both
labor and product market characteristics, and is responsive to retirement income policy.
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