The influence of changes in accounting and tax regimes on the emphasis placed by firms on defined benefit pension plans

Abstract

During the last ten years, the number of workers covered by defined benefit retirement plans has fallen precipitously. At the same time the number of workers covered by defined contribution plans has climbed to record levels. This study examines whether the changes in accounting and tax regimes contributed to the decreasing emphasis by firms on defined benefit pension plans. I control for economic variables identified in prior studies as determinants of pension choice. I also control for variables identified in the popular press as being responsible for the change in emphasis. This study extends prior pension choice literature by looking at previously identified pension determinants over an extended period of time and interacts those determinates with changes in accounting and tax regimes. I find that both the changes in accounting and tax regimes motivated firms to de-emphasize defined benefit plans.