CRI Working Papers

Inequitable Access to Employer-Sponsored Benefits, Financial Stability, and Employee Turnover

By Manita Rao and Jeremy Burke

As a provider of both wages and benefits, employers are uniquely positioned to influence employee financial stability. Inequities in benefit provision across demographic groups, however, may lead to systematic disparities in financial security. This working paper uses longitudinal data from a nationally representative internet panel to examine the post-pandemic evolution of racial/ethnic and sex disparities in access to employer-sponsored benefits and how benefits relate to employee financial stability. We find substantial, persistent, and in some cases growing, disparities in access to benefits between Whites and non-Whites, and men and women, over the 2021 – 2023 period. Importantly, these disparities matter – employer-sponsored benefits are systematically linked to higher employee financial security. We also find that access to benefits is predictive of lower employee turnover, suggesting possible impacts on employer productivity. The results suggest that persistent, inequitable access to employer-sponsored benefits may be contributing to the well-known gaps in financial security across race and sex. Expanding the provision of benefits might not only reduce disparities in financial stability but also improve employer outcomes by reducing employee turnover.

Playing Catch-up with Health Savings

By Jacob Berman, Adam Bloomfield, and Sita Slavov

This study examines how saving behavior responds when individuals become eligible for the Health Savings Account (HSA) “catch-up” contribution at age 55. When eligibility increases the annual contribution limit by $1,000, individuals who were already near the limit increase their saving by roughly $387 on average — about 40 percent of the new allowable amount. Those contributing well below the limit also raise their saving, but more modestly, suggesting behavioral responses beyond simple incentives and constraints. Crucially, these additional contributions are not immediately withdrawn for medical expenses — indicating a longer-term savings motive — and they do not reduce 401(k) or other retirement plan contributions. In other words, the catch-up provision increases total tax-advantaged saving rather than shifting dollars across accounts. However, married couples often fail to coordinate contributions to fully take advantage of complex spousal rules, leaving tax benefits on the table. The findings illustrate how the structure of tax incentives influences household saving decisions and highlight the importance of simple, well-designed account rules for helping families build financial resources.

How Do Tax Incentives Influence Employer Decisions to Offer Retirement Benefits?

By Adam Bloomfield, Lucas Goodman, Shanthi Ramnath, and Sita Slavov

In recent years, policy makers have adopted many measures to incentivize the establishment of employer-sponsored retirement plans (ESRPs). One such measure – implemented in the early 2000s and made more generous in recent years – allows smaller firms that establish an ESRP to claim a tax credit to offset part of their costs during the initial years. We examine firm take-up of this credit. The authors find that only 1 percent (pre-policy expansion) to 5.5 percent (post-policy expansion) of apparently eligible firms claim the credit. They document heterogeneity in credit takeup rates by industry, firm owner education, and use of tax preparation services. They also document evidence of “tax preparer learning,” whereby take-up among a tax preparer’s clients increases after that preparer files their first credit. Finally, the authors document that most firms only claim the credit for one year despite being eligible to do so for up to three years.

Social Security Claiming Timing and Older Adults’ Financial Wellbeing

By Zeewan Lee and Manita Rao

How well individuals optimize the timing of their Social Security (SS) claims can influence their financial wellbeing. In this paper, the authors evaluate the impact of Social Security claiming timing on older adults’ financial outcomes by constructing an Optimization Failure (OF) index, which measures the difference between optimal and observed claim timing. The analysis uses data from the Health and Retirement Study (1992 to 2020) linked to restricted Social Security Administration records and Working Trajectories data. The authors find that sub-optimal claiming is associated with decline in real estate and total wealth, while also reducing liquidity constraints in the post-claiming period. They also find that these links are more prominent among sub-optimal early claimers compared with those claiming sub-optimally late.

Does the Catch-up Contribution Policy Improve Retirement Preparedness?

By Ngoc Dao and Manita Rao

This study examines whether the Catch-up Contribution policy, which provides incentives for adults aged 50 and over to increase contributions to Tax-Deferred Retirement Accounts (TDRAs), is an effective policy tool to improve retirement preparedness. The findings indicate that the Catch-up Contribution provision led to an average increase of $1,485 (18 percent) in contributions to TDRAs among upper-income households. This study is the first to examine the effect of the Catch-up Contribution provision on households across the income distribution and suggests that tax incentives are an effective policy tool in promoting retirement savings, especially for adults nearing retirement, and that tax incentives targeted toward improving retirement have a positive impact on households of all incomes as opposed to benefiting only high-income individuals, as documented in previous studies.

State Auto-IRA Policies and Firm Behavior: Lessons from Administrative Tax Data

By Adam Bloomfield, Lucas Goodman, Manita Rao, and Sita Slavov

Note: The earlier version of this paper was titled: Why Do Employers Establish Retirement Savings Plans? Evidence from State “Auto-IRA” Policies.

Several states have recently attempted to boost retirement saving by adopting “auto-IRA” policies that require employers not currently offering an employer-sponsored retirement plan (ESRP) to either (1) establish an ESRP or (2) enroll employees in state-facilitated Individual Retirement Accounts (IRAs). We identify the effect of these state retirement plan mandates on firm decisions to offer ESRPs, treating the gradual rollout of these policies across states and employer size categories as a series of “experiments.” Using U.S. tax microdata, we estimate that at least 30,000 firms have been induced to offer an ESRP by these policies, although there is substantial heterogeneity in these effects across firm and worker characteristics. This effect is large considering that, for employers, establishing and maintaining an ESRP is more costly than utilizing the state-facilitated IRAs. We explore both rational and behavioral explanations for why firms might choose the higher-cost approach to complying with auto-IRA policies.

The Allure of Round Number Prices for Individual Investors

By Adam Bloomfield, Alycia Chin, and Adam Craig

Trading stocks disproportionately at round number prices (e.g., $5.00 instead of $5.01, “round number bias” [RNB]) violates classical assumptions about investor rationality.  However, it is unknown which individual investors engage in this bias. The authors examine the prevalence of RNB and how it relates to individuals’ demographic and trading characteristics by analyzing novel, account-level administrative data covering over 20 million accounts and 134 million transactions. They find that round number trades are 6.7% more likely than expected, and integer trades are nearly four times more likely than expected. Younger, male, and non-professional investors are much more likely to engage in RNB, particularly when buying relative to selling or shorting securities, the first time such heterogeneity has been documented. Given past findings showing large wealth transfers away from those that exhibit RNB, the results suggest potential welfare consequences for individual investors.

How Do State Retirement Savings Policies Affect Labor Supply?

By Adam Bloomfield, Ngoc Dao, and Manita Rao

This study investigates the labor market impacts of state-based retirement savings policies, often referred to as automatic-enrollment IRA (AutoIRA) programs. Utilizing data from the Annual Social and Economic Supplement to the Current Population Survey (CPS-ASEC) from 2010 to 2023, the authors estimate Two-Way Fixed Effects (TWFE) and staggered Difference-in-Differences (CSDiD) models. Despite the theoretical ambiguity surrounding the effects of workplace retirement savings options on labor markets, empirical findings reveal that these policies increase private-sector employment by 1.8% to 2.3% and may increase earnings by 2% to 4%. These findings contribute to the literature on how retirement savings policies, specifically private pensions (e.g., DC plans and IRAs), influence workers’ labor supply behavior and firms’ wage decisions.