Payout Elections of Participants in a Public Pension

Abstract

The payout choices made by retiring workers of the Oregon Public Employees Retirement System (PERS) and their spouses who sought information about retirement after February 1, 1990, and later retired during 1990 are reported. The study population was found to divide itself almost evenly among options that provide guaranteed lifetime income protection to the spouse, those that provided a temporary refund guarantee, and those that provided no ongoing income to the spouse after the retiree's death. The results strongly support the existence of adverse selection in the payout options chosen by retirees. The health of the retiree does more to explain the payout choice than does any other variable. While the results indicate that retirees feel more strongly about providing adequately for spouses than do the spouses themselves, this statement of apparent priority is contradicted when a significant number of spouses or retiring PERS employees will have no lifetime income payable under that or any other pension plan.