Pension Projection Models
Revenue and Benefit Effects of Reducing DC Pension Salary-Reduction Caps
This paper contains estimates of the impact of lowering maximum allowable pretax contributions to salary-reduction defined-contribution pension plans beginning in 2012. Several reforms are considered, including lowering the base contribution cap, eliminating the catchup cap, combining those two reforms, and replacing the current caps with a 20/20 cap. For each reform, estimates of the aggregate dollar decline in DC plan contributions by employees and employers are presented. In addition, an estimate of the rise in federal individual income tax revenue during the first year of the reform is provided. And finally, the retirement income effects of each reform are estimated using a cohort sample of individuals who experience the reform over their whole work career. (July 2013)
Automatic IRA Reform: How Much Will Retirement Income Go Up?
This paper uses PENSIM and the other PSG models to replicate recent estimates from the Urban Institute DYNASIM microsimulation model of the retirement income effects of an automatic IRA reform. The replication is achieved only by introducing a series of unrealistic assumptions, the cumulative effect of which indicates that the DYNASIM estimates are about five times the size of estimates produced using more realistic assumptions. The paper also provides distributional estimates that cast doubt on the target efficiency of such a reform: at least half the aggregate benefits of the reform flow to the top half of the retirement income distribution with the top quartile receiving more benefits than the bottom quartile. (October 2012) [files needed to reproduce the analysis in this paper are here]
Retirement Income Effects of Changing the Income Tax Treatment
of DC Pension Plans
This paper presents estimates of the after-tax retirement income effects of switching, over a whole lifetime, the federal income tax treatment of defined contribution (DC) pension plan contributions and withdrawals from the traditional tax-exempt and taxable to an alternative treatment in which all DC contributions would be taxable and all DC withdrawals would be tax-exempt. The estimates are produced using a microsimulation model of lifetime pension accumulation that contains a federal income tax calculator and a social security benefit calculator. Two sets of estimates are presented: one in which income tax thresholds are assumed to be indexed to wages and another in which thresholds are indexed to prices as under current law. The estimates suggest that the average effect on after-tax retirement income of this switch in the federal income tax treatment of DC contributions and withdrawals would be less than a one percent decrease when tax thresholds are indexed to wages and slightly more than a two percent increase under current-law price indexing. The magnitude of the changes rise with lifetime earnings and there is considerable variation around the average effect especially when tax thresholds are indexed to prices. (May 2012)
Projecting Future U.S. Pension Benefits
Retirement benefits from employer-sponsored pensions and social security are projected for a microsimulation sample of the 1990 birth cohort recognizing uncertainty in asset returns and inflation rates. The variability in pension benefits is such that a cohort individual, viewing this risk from birth, would prefer a transfer of government resources from subsidizing pension contributions to funding scheduled social security benefits even when assuming a moderate degree of risk aversion. (January 2009)
Integrated Asset-Liability Management: An Implementation Case Study
Account of how Fannie Mae implemented aspects of integrated asset-liability management in different lines of its housing finance business during the early 1990s, March 1996. Published in Ziemba and Mulvey (editors), Worldwide Asset and Liability Modeling, Cambridge University Press, 1998.
Other papers listed in vita
Several papers on various quantitative finance topics by Martin Holmer published in Operations Research, Interfaces, and European Journal of Operational Research.
Ulico v. Clover Capital Management (October 2001)
A Tool for Analyzing State Market-Oriented Reforms:
the Health Insurance Market Simulation Model
Rationale, status, and plans for a stochastic microsimulation model of the dynamics of establishment and plan interaction in health insurance markets (January 1995). [The HISIM model was being developed at that time as part of a RAND project funded by the Robert Wood Johnson Foundation.]
An Agenda for Simulating Plan Offer Choice by Establishments
and Offer Price Setting by Plans
HISIM model development ideas (April 1996). [The HISIM model was being developed at that time as part of a RAND project funded by the Robert Wood Johnson Foundation.]
Other papers listed in vita
Several papers on the tax treatment of health insurance and on the demand for health insurance by Martin Holmer published in Review of Economics and Statistics, Management Science, and Journal of Health Economics.