what do employees know about their pension plan?

What Do Employees Know AboutTheir Pension Plan?

What Do Employees Know About Their Pension Plan?ANDREW A. LUCHAK and MORLEY GUNDERSON

ANDREW A. LUCHAK and MORLEY GUNDERSON*

Original survey data based on 529 respondents in a large organization are usedto analyze how much employees know about various features of their occupa-tional pension plan. While the level of understanding was quite low among allemployees, it was quite high among those for whom the knowledge mattersmost in terms of their behavioral decision making. Our results show that ratherthan being optimal labor contracts that workers enter into with full knowledge atthe time of employment, pension contracts are more like contingent claims con-tracts evolving under conditions of uncertainty and incomplete information.

THE MOST COMMON FORM of occupational pension plan basesbenefits on a formula that multiplies final earnings by years of pension-able service and a constant. Such plans add an element of risk to the pen-sion promise in two main ways. First, the final-earnings benefit formulafixes the pension in nominal terms at the point of departure so that earlyleavers (e.g., quitters or those who are dismissed) receive a pension thatis not indexed to their salary just prior to retirement. The longer the timebefore the terminating employee is actually eligible to receive a pensionand the higher the salary growth during this intervening period, thegreater is the penalty for early departure. Second, such plans make eligi-bility for more generous early retirement subsidies conditional on higheryears of continuous service or membership in the pension plan.Assuming nonportability between plans, quitting creates discontinuities

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*The authors’ affiliations are, respectively, Faculty of Business Administration, Memorial University ofNewfoundland and Centre for Industrial Relations and Department of Economics, University of Toronto.Research assistance from Tony Fang is gratefully acknowledged, as is financial assistance from the SocialSciences and Humanities Research Council of Canada and the helpful suggestions of two anonymousreferees.

INDUSTRIAL RELATIONS, Vol. 39, No. 4 (October 2000). © 2000 Regents of the University of CaliforniaPublished by Blackwell Publishers, 350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road,

Oxford, OX4 1JF, UK.

that prevent employees from taking advantage of the cumulative value oftheir pensionable service over their career.

Considerable empirical research has been devoted to understanding thefunctions of pension plans and whose interests they serve (reviewed inAllen and Clark, 1987; Ippolito, 1987, 1994; Mitchell, 1988a; Bodie, 1990;Lazear, 1990; Gustman et al., 1994; Dorsey, 1995). Worker demand hasbeen studied as a function of preferred tax treatment (Long and Scott,1982), economies offered through group purchase and record keeping(Ghilarducci and Terry, 1999; Mitchell and Andrews, 1981), retirementinsurance (Bodie, 1990), and union preferences (Freeman, 1981), whereasfirm supply has been examined as a function of the pension’s ability to raiseeffort and reduce turnover (Lazear, 1990; Pesando et al., 1992), as well asto allow firms and possibly unions to pursue more opportunistic ends. Asdiscussed subsequently, this can occur if firms can use misperceived pen-sion benefits to pay lower wages or to redistribute benefits to particularemployees (Deaton, 1989; Ghilarducci, 1990; Cornwell et al., 1991).

An important next step for pension research is to better understand therelative importance and interconnections between these alternative ratio-nales for employer-sponsored pension plans (Gustman et al., 1994). Under-standing employee interests is especially important because there is littledirect evidence that they know about the risks they face under long-termpension contracts. In this article we help move in these directions by exam-ining how much employees know about the various characteristics of theiremployer-sponsored pension plans and what determines this knowledge. Ifemployer-sponsored pension plans fulfill a particular labor market func-tion, then the amount and determinants of employee knowledge should beconsistent with those plan features facilitating that function. For example, ifpensions help firms regulate retirement, then employee knowledge shouldbe highest among employees closest to making this decision. Conversely, iffirms use pensions as an opportunistic device to exploit workers, then onewould expect pension knowledge to be poor, particularly among those forwhom the firm has the greatest opportunity to exploit.

This article begins with a review of the existing research on workerknowledge about pension plan provisions. Next, we examine what differentmodels of pensions would predict about how much workers should knowabout their pensions generally and provisions contributing to pension lossin particular. The methodology, data, and empirical results are then dis-cussed, followed by a conclusion, highlighting some policy implications.

What Do Employees Know About Their Pension Plan? / 647

Review of the Literature

A limited body of empirical research has focused on how much workersknow about their pensions (Leigh, 1981; Mitchell, 1988b; Ghilarducci,1990). There are, however, important methodologic issues in this literature,recognized by the authors and which limit the conclusions that can bedrawn about the role and functions of employer-sponsored pension plans.

Pension knowledge has been examined with respect to only a limitedrange of pension plan provisions. These include (1) vesting (Leigh, 1981),(2) defined-benefit versus defined-contribution status (Clark and Pitts,1999; Mitchell, 1988b), (3) contribution information (Mitchell, 1988b),(4) worker valuations of future retirement benefits (Leigh, 1981), (5)worker valuations of future retirement benefits expressed as a ratio ofemployer or actuary valuations (Ghilarducci, 1990), and (6) early and nor-mal retirement requirements (Leigh, 1981; Mitchell, 1988b). Gaps in ourknowledge remain on a wide variety of plan provisions that are importantfor understanding how pensions operate.

Existing assessments of pension knowledge have been measured withconsiderable or uncertain levels of measurement error. For example, thereis seldom any assessment of the correctness of employees’ responses tovarious factual questions about their pension plans (Leigh, 1981).Ghilarducci (1990) does compare employee valuations of pension benefitswith those of employers and actuaries; however, few employees likely havethe technical skills needed to perform this calculation.1 A more empiricallytractable approach to estimating pension knowledge is found in Mitchell(1988b), who matched employer and employee reports of specific planprovisions. However, even this method leaves uncertainty as to which partyis correct if the two parties differ in their responses.

With the exception of Ghilarducci (1990), only lower-order learningskills, such as recall of specific pension plan provisions, have been exam-ined in previous research. No studies have examined higher-order skills,such as the ability to apply pension plan provisions to one’s own demo-graphic and future work plans. Examining pension knowledge throughhigher-order learning skills provides a more valid and reliable test ofpension incentives because it requires employees to process informationin a way that more closely approximates the process through which suchincentives operate.

648 / ANDREW A. LUCHAK AND MORLEY GUNDERSON

1Based on the original data set of 641 cases from the 1979 and 1980 surveys of the President’s Commis-sion on Pension Policy, Ghilarducci’s analysis of employee, employer, and actuary valuations is restrictedto 49 employees.

Many of the foregoing problems in the literature are dealt with in thisarticle by the use of a unique survey data set that links individuals to spe-cific pension plan, demographic, spousal, and job characteristics.

Pension knowledge is measured more precisely because it is evaluatedagainst the actual provisions of the particular employer-sponsored pen-sion plan. Also, employee knowledge is examined with respect to a broadrange of pension plan provisions including the benefit formulas, compul-sory retirement, and inflation protection. This permits an assessment ofthe knowledge possessed by employees about the central mechanismsthrough which employer-sponsored pensions function. Knowledge is alsobetter measured through the higher-order learning skills of employees.In particular, assessing understanding of the type of benefit employeesexpect to receive at their planned age of retirement requires employees toapply the variety of provisions of the pension plan to their own personalcircumstances, which more closely approximates the process throughwhich pension incentives operate. In addition to analyzing separate pen-sion plan provisions, a more general summary index of employees’ pen-sion plan knowledge is also developed.

The methodology used in this study provides a stronger check againstcompeting explanations about what employees may or may not knowabout their pension plans. In particular, the empirical analysis explicitlyanalyzes the option value to the employee of staying in the job until pen-sion wealth is maximized under the plan. This provides a stronger testthan that provided by previous research, which uses variables such as age,service, and earnings as proxies for expected pension receipt.

Pension Models and Worker Knowledge

The risk of pension loss under the final-earnings pension plan raisestwo basic, interrelated questions: What do employees know of the provi-sions contributing to such losses? and Why do they agree to them?

The retirement savings model views the pension as “owned” by theemployee (Mitchell, 1988a). Firms manage pensions on behalf of employ-ees because scale economies make it less expensive for groups of workersto invest (Ghilarducci and Terry, 1999; Mitchell and Andrews, 1981),and it is through employer sponsorship that employee contributions (andinvestment earnings on those contributions) are allowed to accumulate ona tax-deferred basis (Long and Scott, 1982). One problem facing thismodel is rationalizing the existence of plan provisions that threaten thepension promise. That is, if employees own their pensions, why do theyaccept the risk of pension loss? Presumably, workers do not recognize


how plan provisions such as final average benefit formulas or restrictivevesting or early retirement eligibility conditions threaten the value of theirbenefits (Mitchell, 1988a).

A second variation of the retirement savings model that reconciles thefinal-earnings plan’s savings function with the risk of pension loss is theretirement insurance model (Bodie, 1990). It argues that employers search-ing for the lowest-cost means to hire employees may offer defined-benefitplans because of several insurance functions that protect against economicinsecurity in retirement and ensure ultimate receipt of the pension. Forexample, final-earnings benefit formulas can insure against inflation riskby indexing one’s pension to earnings just before retirement. Occupationalpension plans integrated with public pensions can limit the risk of benefitcuts under these programs. Cost-of-living adjustments can insure benefitsagainst postretirement inflation risk. Early retirement provisions can insureagainst the risk of layoff or work-limiting disabilities (Gustman et al.,1994). Employers may even reduce the risk of pension ignorance by sup-plying pension information to employees more efficiently (Bodie, 1990). Ifpensions serve an insurance function, then workers may be expected toexhibit some pension ignorance, but with knowledge likely to rise for thoseplan provisions which insure against the important risks.

The union preference model emphasizes that unions can encouragedefined-benefit pensions because they respond to the preferences ofmedian members who are older and less mobile and therefore have moreto gain from such arrangements (Freeman, 1981). Final-earnings plansalso may offer unions institutional security, since individuals are morelikely to rely on a union than to invest in learning about complex and tech-nical pension plan details (Freeman, 1981) or because the union can pro-vide a source of voice or protection from arbitrary treatment, an importantconsideration for anyone who relinquishes the exit option as a dispute-resolution tactic (Freeman and Medoff, 1984). These considerations sug-gest that many union members may not have much pension knowledgebecause they would rely on the union for such information. However,knowledge would be higher amongst median union voters (e.g., older,more tenured, less mobile employees), who are likely to influence uniondecisions in this area. Even though the level of knowledge could be lowfor the average union member, it would be higher for those who have morepension wealth at risk or who could lose it if subjected to layoffs. Thiswould be especially the case for those pension plan features which couldaffect the pension benefits.

The implicit contract model views pensions as important instruments ofhuman resource management. According to this perspective, the riskiness


of the pension promise allows employers to attract stable workers (Allen etal., 1993; Ippolito, 1994), reduce monitoring costs (Hutchens, 1987), pre-serve training investments (Dorsey and Macpherson, 1997), induce greaterwork effort (Luchak, 1997), regulate turnover and retirement decisions(Ippolito, 1987, 1991; Pesando et al., 1992; Allen et al., 1993; Gustmanand Steinmeier, 1993), and ultimately, increase firm performance (Allenand Clark, 1987). Among other benefits, the employee receives an implicitguarantee of employment security, subject to good performance, untilretirement from the firm. If pensions operate in this manner, workersshould be fully knowledgeable about those plan provisions which moti-vate them to behave as they do throughout their career. In particular, allworkers should know about those provisions which contribute to pensionloss such as benefit formulas, retirement eligibility conditions, and index-ing provisions.

In contrast, the opportunism model views pensions as instrumentsthrough which opportunistic firms and unions can take advantage of unin-formed workers or those with little power and influence in the workplace(Deaton, 1989; Cornwell et al., 1991; Ghilarducci, 1990). These modelsnot only contemplate some worker ignorance but also see the partiesencouraging it for various reasons. For example, workers who overvaluetheir pensions allow employers to hire and retain workers at lower costs(Ghilarducci, 1990). Alternatively, pension ignorance among less influ-ential workers can allow firms or unions to redistribute benefits to morevalued or influential persons without much resistance from the others.This model implies low levels of knowledge among those most vulnera-ble to be exploited (e.g., females, those in poor health, nonsupervisors,the less educated) and those facing the largest potential losses under thepension plan and correspondingly better knowledge among high-status,elite workers.

Methodology and Data

The empirical analysis essentially links various measures of whatemployees know about their pension plan (dependent variables) to demo-graphic, spousal, job, and pension characteristics believed to influencethat understanding. The link between employee knowledge and theseobservable characteristics is based on the expectation that employees arelikely to know more about their pension plan features if they have the eco-nomic motivation or incentive to learn about plan details and have accessto and the ability to process such details. The variables included in theanalysis are defined in Appendix 1.


Dependent variables. Pension knowledge is operationally defined hereas the probability that an employee makes a correct response to a questionconcerning the operation or application of the employer’s defined-benefitpension plan. Knowledge over several different pension plan provisions isexamined. These include (1) contribution formula, (2) final earnings bene-fit formula, (3) age of normal retirement, (4) eligibility conditions for earlyretirement benefits, (5) age of compulsory retirement, (6) eligibility condi-tions for a pension at planned age of retirement, and (7) ad hoc inflationprotection. In each case, the employee was asked a question pertaining tothe existence of the particular plan feature. Multiple response options wereprovided to reduce the potential for guessing. The accuracy of responsesfor all questions was established ahead of time through consultation withthe participating union and with the help of an information brochure co-written by the employer and union that served to educate employees abouttheir pension rights. Responses were coded as 1 for correct, 0 otherwise.2

The dependent variables were chosen in part to better understand alter-native explanations for why pension plans exist and to shed light on thepreviously discussed different models for such pension plans. Employeeknowledge of their personal contributions is perhaps most relevant to thetax-favored retirement savings rationale. It is also relevant to the retire-ment insurance model in that the contribution formula used is integratedwith Canada Pension Plan payments. This variable was based on a skip-pattern question asking respondents if they made contributions to thepension plan, and if so, what their contributions were based on. A scoreof 1 was assigned for those who knew their contributions were based on avarying percentage of their base earnings from employment, 0 otherwise.

Knowledge of the final-earnings benefit formula is relevant to argu-ments that employees want pensions that insure against income loss, thatrespond to median voter preferences, and that enable firms to attract sta-ble workers, encourage work effort, reduce turnover, and regulate retire-ment behavior. Lack of knowledge of the benefit formula also can be ameans by which unions or firms redistribute pension wealth, say, to elitemembers or employees. This variable was based on a question asking if


2As an alternative to dummy coding, an ordinal ranking system in which higher values were assigned tomore accurate responses was developed for some questions. For example, knowledge of early retirementwas coded along a seven-item scale, with a score of six being assigned to individuals who knew that theirplan contained both special (undiscounted) and reduced early retirement options and could name at least oneeligibility condition under each option. Those identifying some lesser combination of types of early retire-ment and eligibility conditions received lower scores, whereas those believing their plan had no early retire-ment option or who indicated that they did not know received scores of zero. The results using OLSregression with these ordinal scales were very similar to the logistic regression results presented below. Fora consistent presentation format across all variables, we present the dichotomous dependent variable results.

respondents knew the type of benefit formula their plan provided, with ascore of 1 being assigned to those who knew they had a final-average-earnings formula, 0 otherwise.

The retirement regulating functions of pensions under implicit con-tracts are examined more particularly by examining worker knowledge oftheir normal, early, and compulsory retirement requirements and the eli-gibility conditions for pension benefits at their planned age of retirement.Early retirement pensions also may be preferred by median union votersand help workers in case of disability, and so knowledge of these provi-sions is relevant to the union preferences model and to arguments thatpensions provide certain insurance functions. Because more generousearly retirement subsidies can redistribute pension wealth from low- tohigh-tenure workers (the later being more likely to be eligible for earlyretirement), systematic misinformation about this provision from workerswith little power or influence provides a test of the opportunism thesis.

The normal retirement variable was based on a question asking whatthe specified normal retirement age was under the plan, to which aresponse of 65 was coded 1, 0 otherwise. Knowledge of early retirementwas based on a question asking workers to identify the eligibility condi-tions associated with early retirement under the pension plan. A score of 1was assigned for those who could name at least one eligibility conditionassociated with each of the two main categories of early retirement underthe pension plan (with and without discount), 0 otherwise. Knowledge ofcompulsory retirement was based on a skip-pattern question that initiallyasked if the employer had a compulsory retirement policy, and if so, whatthe age of compulsory retirement was. Respondents indicating age 65 asthe age of compulsory retirement were coded 1, 0 otherwise. Knowledgeof the pension benefit eligible for receipt at planned age of retirement wasbased on a series of questions aimed at determining whether employees’knew the specific retirement eligibility condition (e.g., normal retirementat age 65, early retirement without discount after 35 years of service) thatwould permit them to qualify for a pension at their planned age of retire-ment from the organization. A score of 1 was assigned to those able toidentify a provision for which they would qualify, 0 otherwise.

Finally, knowledge of ad hoc as opposed to formal inflation protectionfor pension benefits is based on a question asking respondents the type ofinflation protection their plan provides, to which a score of 1 was assignedfor ad hoc protection, 0 otherwise. This variable is most immediately rele-vant to the proposition that such provisions help employees limit inflationrisk. Since ad hoc adjustments generally benefit longer-tenured workers,knowledge of this provision is also relevant to the union preferences and


opportunism models. Such adjustments also may be viewed as an impor-tant obligation of the employer under implicit contracting arrangements.

In addition to these separate measures of employee knowledge aboutparticular plan provisions, a summary index of pension knowledge is usedto provide a more general conception of what employees know abouttheir pension plan. This index was calculated as the arithmetic index andweighted index sum of correct responses to the seven previously discussedpension features. Since some of the features involved subcomponents,weights were assigned based on the identifiable components of knowledgethat an employee needed to know in order to possess full understandingabout the plan provision in question. The components of the impliedweights are given in Appendix 2. For example, knowing the formularequired for employee contribution requires knowing that an employeecontribution is required and the exact formula for that contribution. Hav-ing full knowledge about the employee contribution formula, therefore,was given a weight of 2. The arithmetic and weighted indices summed to7 and 17, respectively, and scores in each case were standardized out of100 for ease of interpretation.

Independent variables and expected relationships. As indicated, thedegree of knowledge of pension plan features depends on the functionsserved by pensions. In addition, employees are expected to know moreabout their pension plan features if they have the economic motivation orincentive to learn and the ability to process and better access pension plandetails. These are related to various observable characteristics that are theindependent variables of this analysis.

Among demographic factors, age may be related to pension knowledgein a number of ways. If pensions perform an insurance role, then a positiverelationship between age and knowledge may be expected because thoseclosest to retirement likely value their retirement income security most.3

Age also may be expected to be positively related to knowledge becauseolder workers likely have more influence in the union (median union votereffect) and are more vulnerable to job loss (union protective function).Alternatively, if firms and/or unions systematically try to exploit olderworkers vulnerable to pension losses, then a negative relationship may beexpected. The full knowledge requirements of implicit contracting modelsimply no systematic variation between age or any other independent vari-able and pension knowledge.


3As an alternative measure, we constructed a “years to retirement” variable defined as one’s planned ageof retirement less current age. This variable, however, was highly correlated with both age and tenure andso was excluded from our analyses.

Consistent with an insurance role, persons who perceive their healthstatus to be above average may have less incentive to learn about pensionsas a potential source of income maintenance in case of disability, whereaspersons who perceive their health status to be worse than average mayhave more incentive, although their poor health may interfere with thatprocess. Unions may make special efforts to advise those in poorerhealth about their pension rights if the union preferences model is correct,whereas an opposite effect may be expected under the opportunism thesis.No systematic relationship between pension knowledge and gender(female) is expected because we control for many of the factors affectingknowledge that would be correlated with gender (e.g., earnings, tenure,pension rights). A finding that females are less informed about their pen-sions, however, would provide a partial test of the opportunism thesis.

With respect to spousal characteristics, unmarried persons may havestronger motivation to learn about plan provisions because of their greaterrelative mobility and because of the absence of a partner who may providesuch knowledge. Among married persons, those with spouses employedand/or covered by their own pensions may have greater ability to processpension details because of information sharing and coordination of efforts.On the other hand, those with “pension-wise” spouses may have less moti-vation to learn about pensions because one partner has assumed responsi-bility for learning all matters pertaining to both partners’ pension plans.Formerly married persons (spouse separated) may or may not be knowl-edgeable about their pensions depending on how much information shar-ing occurred with their previous partner and the need to learn more abouteach other’s financial circumstances after a divorce or separation.

Job and human capital characteristics such as higher levels of educa-tion, firm-specific training, occupational status, supervisory authority,level of earnings, and years of service (tenure) have all been included inprevious research studies. A positive tenure effect lends some credence tothe union preference model in that median union voters are more likelyto have higher tenure. If employees desire pensions as a tax-preferredsavings vehicle, then we would expect earnings to be positively relatedto employee knowledge about the contribution provisions. If pensionsenhance employee performance under implicit contracts, then employeesat all levels of earnings should know about their final earnings benefit for-mula, albeit gaining more from performance could encourage knowledgeacquisition. If pensions are used to pay off elite workers, then we mayexpect to see those in “higher positions” such as supervisors showingmore knowledge about plan provisions.


Consistent with an insurance role, persons who perceive that they arelikely to be laid off may be more likely to have a strong incentive toacquire information about their pension plan, especially since their pen-sion benefits could be affected by their being laid off, and they may beunder liquidity constraints that could be eased by pension benefits. A pos-itive perceived layoff effect also would support the union’s protectivefunction under the union preference model. An opposite effect would beexpected if firms use pensions opportunistically. The two work-locationvariables (head office, regional office) are included as regional controls.

Of central importance is the loss to employees for terminating earlyunder the pension plan. Following the work of Lazear and Moore (1988)and Stock and Wise (1990), we model the reduced value of pension bene-fits from early departure as the loss of an option value (pension loss). Aworker who quits or is discharged loses the option of working and accru-ing additional pension benefits. Generally, option values rise steadily overan employees’ career and then typically turn negative after the date atwhich the employee becomes eligible for an unreduced pension. Negativeoption values reflect the fact that the gain in wealth from working an addi-tional year and acquiring entitlement to a higher nominal pension (due tothe additional year of service and salary increment) is eventually offset bythe loss in wealth caused by the shorter time period over which the pensionactually will be received. Our measure is defined as the present discountedvalue of the difference in maximum pension payments if one were to workuntil pension wealth was maximized in the current job (the stay pension)and the pension wealth associated with separation from that first job andcommencing a second job immediately (the quit pensions). The differencein pension wealth between the two scenarios is a measure of the potentialpension wealth that is “at stake” or “on the table” in that it could be lost bya job change or a job loss. We express this potential pension loss as a ratioof the employee’s stay pension to highlight the proportion of total poten-tial pension wealth that individuals risk by terminating immediately ratherthan at the age that their stay pension is maximized.4


4For example, the option value of an individual currently age 40 with 10 years of service would be basedon a stay pension that is maximized at age 58 with 28 years of service (stay) minus the sum of the maximumvalues of the quit pension. The quit pension is based on two components. The first component is the pen-sion wealth from the current firm up to the time of the quit. In this example, it is based on termination at age40 with 10 years of service (quit1). The second component is based on the pension the person would get athis or her new employment. In this example, it is based on termination at age 58 with 18 years of service(quit2). Our option value is then calculated by the general formula: pension loss = [stay – (quit1 + quit2)]. Ifthe same individual currently was age 60, then the option value would be based on a stay pension at age 60with 30 years of service (stay) and two quit pensions, the first valued at age 58 with 28 years of service(quit1) and the second at age 60 with 2 years of service (quit2).

Our potential pension loss measure is calculated in the context of a planthat provides a lifetime pension payable as early as age 55 (for the vastmajority of employees). The benefit received is based on a varying per-centage of employees’ highest five consecutive years of salary multipliedby their years of continuous service under the plan. Annual benefits get aguaranteed annual increase equal to 60 percent of the previous year’sincrease in the consumer price index. In constructing the pension lossmeasure, certain assumptions were made: Inflation and nominal interestrates were assumed to grow at annual rates of approximately 10 and 5 per-cent, respectively, and date of death varied by current age.

Potential pension losses are expected to be related to pension knowledgedepending on the pension’s role and functions at work. If pensions are sim-ply retirement savings “owned” by the employee and such saving is notthought to be affected by pension plan features, then there would be noneed to be informed of pension plans. If the pension savings could beaffected by plan features, then a positive relationship between knowledgeand potential pension losses is expected because those with more pensionwealth at stake are expected to be better informed about plan features thatcould affect their wealth. If the implicit contracting model is correct, thereshould be no relationship between pension loss and worker knowledgebecause all workers are expected to know about their pension plans, albeithaving more at stake could encourage knowledge acquisition. If the insur-ance and union preference models are correct, we expect a positive rela-tionship because the employer and union should be expected to protectthose most vulnerable to pension losses, respectively. An opposite relation-ship, however, would be expected if the opportunism thesis were correctbecause the union or firm seeks to exploit those most vulnerable to pensionlosses.

Persons who continue working past the age at which pension wealth ismaximized in their current job will have a negative option value associatedwith staying at their current job. It is important to capture this effectbecause negative potential losses represent a significant shift in the lifetimeprofile of option values that start from zero and remain positive until peak-ing, usually at first eligibility for an immediate, undiscounted pension.Negative potential losses indicate how much more pension wealth employ-ees could have earned had they left their current job when their pensionwealth was maximized instead of continuing to work into the immediateperiod. Negative pension losses are captured by a dummy variable (beyondmaximum pension) coded 1 for all persons who have worked beyond theirmaximum pension wealth in their current job, 0 otherwise. Only about 4percent of the observations were in this category. A negative coefficient on


this variable would be supportive of the opportunism model in that olderworkers with declining pension wealth would be a source of pension sav-ings to the employer. While a positive coefficient may mean differentthings, it could be construed as supportive of the insurance model in thatemployees concerned with replacement rate risk may place greater priorityon higher annual pension benefits even at the expense of lower lifetimepension wealth. A positive relationship also may support the union prefer-ences model in that these former median voters likely will have accumu-lated considerable knowledge in the process of working beyond theirmaximum pension wealth.

Data. The data used in the study come from a 1988 survey, conductedby the authors, of 1000 full-time male and female employees between theages of 20 and 64 who were employed by a large, unionized public utilitycompany in the province of Ontario with a defined-benefit pension planof the final earnings variety. While restriction of the analysis to a singlefirm limits the generalizability of our findings, this is tempered by theinclusion of many micro-level variables not often available in larger datasets and by the representative character of many of the features of thepension plan under consideration.5 A total of 529 questionnaires werereturned and form the basis of the analysis to follow. Despite the lowresponse rate of 52.9 percent, sample estimates show that the sampleachieved is closely representative of the approximately 17,000 target pop-ulation employees in terms of gender, age, and years of service.6 Descrip-tive statistics for these and other independent variables are shown inTable 1. Regression imputation procedures were used to estimate missinginformation for the few respondents who had missing information onsome of the independent and dependent variables.7


5The subject pension plan is a defined-benefit plan, requires an employee contribution, has a final earn-ings benefit formula, provides early retirement both with and without discount, and has ad hoc partialindexation of pension benefits. In Canada, at the applicable time, the proportions of pension plan memberswith similar plan characteristics were defined-benefit plans, 91.4 percent; employee contribution required,69.8 percent; final earnings benefit formula, 60.0 percent; early retirement provisions, 97.8 percent, includ-ing those with undiscounted benefits, 53.5 percent; and some form of inflation protection for pension bene-fits, 34.3 percent (Statistics Canada, 1990).

6Sample estimates showing approximately 21 percent of all employees to be female and, on average, tobe 39 years of age and to have 12 years of service compare favorably with descriptive statistics provided bythe union showing 21 percent of all bargaining unit members to be female and, on average, to be 38 years ofage and to have 13 years of service.

7In the case of the dependent variables, respondents were treated as not knowing the correct response tothe question they skipped, given that misinformed people are more likely not to respond at all. Excluding allcases with missing values on any independent or dependent variable would have led to the removal of 75cases from the analysis. The maximum number of missing cases for any one variable was 4.0 percent(trained). Results based on the incomplete data set yielded very similar results to those reported in this arti-cle and are available from the authors on request.


TABLE 1

OLS REGRESSION ON PENSION KNOWLEDGE INDICES (N = 529)

Index Weighted Index

Variable Mean Coeff. t-Stat Coeff. t-Stat

Index 51.71

Weighted index 51.16

Age 38.01 0.61*** 3.72 0.50*** 2.79

Female 0.21 2.92 0.70 2.15 0.47

[Health same]

Health worse 0.07 –5.40 –1.30 –7.99* –1.73

Health somewhatbetter

0.20 2.69 1.00 2.51 0.84

Health better 0.20 –4.77* –1.76 –4.94 –1.64

[Spouse unemployed]

No spouse 0.13 7.09** 1.96 6.23 1.55

Spouse employed 0.24 0.15 0.05 –0.30 –0.10

Spouse pension 0.25 3.26 1.14 1.24 0.39

Spouse separated 0.06 –6.14 –1.31 –6.27 –1.21

Education 13.12 0.61 0.71 0.76 0.81

Trained 0.90 –4.04 –1.14 –6.62* –1.68

[Skilled]

Clerical 0.19 –0.64 –0.13 –2.57 –0.48

Semiprofessional 0.30 8.30*** 3.03 7.10** 2.34

Other occupation 0.13 –1.87 –0.54 –3.68 –0.96

Supervisor 0.13 –3.14 –0.97 –4.48 –1.25

Earnings 7.45 4.86*** 4.01 4.75*** 3.54

Tenure 12.82 0.27 1.25 0.36 1.50

Layoff likely 0.45 3.86* 1.77 3.33 1.38

[Nuclear]

Head office 0.27 –4.78 –1.60 –2.09 –0.63

Regional office 0.36 –4.89* –1.94 –1.67 –0.60

Pension loss 0.38 20.71*** 3.59 24.40*** 3.82

Beyondmaximumpension

0.04 18.92*** 2.95 21.94*** 3.08

Constant –25.60* –1.74 –23.30 –1.42

R2 0.27 0.24

F-stat 8.40*** 7.17***

*p < 0.10.**p < 0.05.***p < 0.01.

Results for Overall Pension Knowledge Index

Table 1 gives the OLS regression results for the dependent variablesconstructed as the unweighted index and weighted index of overall pen-sion plan knowledge, converted to maximum scores of 100.8 The resultsgenerally are similar for the unweighted and weighted index; hence thediscussion will be based on the unweighted index unless the differencesmerit comment. The mean value of the two indices are 51.71 for theunweighted index and 51.16 for the weighted index, suggesting that, onaverage, respondents were correct 51 percent of the time with respect totheir knowledge of their pension plan features.

This highlights that the level of pension knowledge is moderately lowamong the general workforce, since they had correct knowledge abouttheir pension plan features only about half the time. This casts some doubton the retirement savings model of pensions, which implies uninformedemployees, and on implicit contracting models of pensions, which assumethat all workers do forward-looking calculations involving their expectedpension benefits. The results of a low average level of knowledge are moreconsistent with the insurance, union preference, and opportunism models,where the interests of employees in this area are either safeguarded orexploited by the employer and union.

The significant positive coefficient on our potential pension loss mea-sure confirms that knowledge of pension plan features is highest amongthose who have the greatest pension wealth currently “at stake.” Forexample, the knowledge index score rises approximately 2 points forevery 10 percentage points of total pension wealth at stake due to earlyquitting or termination. Individuals who work past their maximum pen-sion wealth have considerably more knowledge of their pension plan fea-tures, reflecting their opportunities for accumulating such knowledge andthe fact that they are likely in a stage of their careers where retirementdecisions are being made. Generally, these results support the insuranceand median union preference models, in which those standing to gainmost from the pension or who need to know about its operation are mostlikely to know about its provisions. This conclusion is further reinforcedby the positive effects on pension knowledge of age, tenure, and the like-lihood of being laid off.


8With minor exception, multicollinearity was not an issue, being worst in the case of female and clericalworkers (r = 0.78), age and tenure (r = 0.65), clerical workers and earnings (r = –0.62), and female and earn-ings (r = –0.59). All other bivariate intercorrelations generally were less than r = ± 0.30 (a table of correla-tions is available from the authors on request).

Among other variables, persons who perceive their health to be betterthan average9 were less knowledgeable about their pensions, presumablybecause they were less concerned that health limitations may compel themto retire early or to access pension income. This interpretation must be qual-ified, however, by the fact that persons at the other extreme who perceivetheir health to be worse than average also have less knowledge (albeit therelationship is statistically insignificant for the unweighted index). Whilesuch persons may have more of an incentive to learn about their pensionplans, their poor health status also may interfere with their knowledgeacquisition in this area.

Persons in higher-skilled semiprofessional occupations were mostlikely to possess accurate knowledge about their pension plan features, aswere individuals with higher earnings and hence higher expected benefitsunder such final earnings plans. Such persons are likely to have moreknowledge in general, albeit the effect of education, while also positive,was unexpectedly statistically insignificant. Education simply may notmatter in this unionized environment. Persons without a spouse weremost informed about their pension plan characteristics, perhaps reflectingtheir greater mobility and discretion in exercising retirement options aswell as having to rely on their own knowledge without the assistance ofa spouse. Persons employed in nuclear power plant locations also werebetter informed about their pension plan features compared with personsin other locations.

The other variables were statistically insignificant. Of particular note,pension knowledge was not significantly different for women as opposedto men, after controlling for other gender-related factors that may affectpension knowledge. This finding, in combination with the contradictoryhealth effects and absence of any finding of significantly less knowledgeamong the more disadvantaged groups in the labor market (less educated,nonsupervisors, older persons, and those who perceive they are about tobe laid off), calls into question the opportunism model.

Results for Separate Components of the Pension Plan

A separate analysis of the determinants of pension knowledge forseven of the main features included in the overall knowledge index is also


9The health and other dummy variables included in the analysis are interpreted with respect to their com-monly shared omitted reference categories. Our base case is a man in average health who is married with adependent spouse and is working in a skilled trade, which, as can be seen from the variable means, is rela-tively common.

conducted. This highlights how the degree of employee knowledge oftheir pension plans and the determinants of that knowledge vary acrossdifferent features of such plans, and it enables a more thorough examina-tion of the determinants of such knowledge because the determinants arelikely to vary by pension plan feature.

As discussed previously, the dependent variable in each case is coded 1if the employee correctly responded to the nature of that plan feature intheir particular circumstances, 0 otherwise. Logistic regression is used asis appropriate for such dichotomous dependent variables. Because thelogit coefficients themselves do not directly give the change in probabil-ity of a correct response, such changes are calculated10 and evaluated atthe mean probability of a correct response (i.e., the mean of the dependentvariable).11 For each of the seven pension plan features,12 Table 2 givesthe change in probability of the employee having correct pension planknowledge emanating from a unit change in each of the explanatory vari-ables. In the following discussion on each of the separate plan features,emphasis is placed on differences across the plan features and the impli-cations for different pension models.

The overall accuracy of knowledge on the seven plan features is mod-erately low, ranging from accurate responses in only 28 percent of thecases for the contribution formula to 70 percent with respect to the age ofcompulsory retirement. This moderate level of knowledge casts somedoubt on models that contemplate high levels of either pension ignoranceor awareness such as the retirement savings and implicit contract models,respectively.

The retirement savings model receives very limited support, as does theopportunism and implicit contracting theses. Only 28 percent of employeesknew about their contribution formula, which would be an important ingre-dient if pensions were mainly “savings” plans. Furthermore, there is con-siderable variation across other characteristics of the employees in theirknowledge of different pension plan features that suggests that other moti-vations besides simple savings are involved. In contradiction to the oppor-tunism model, those most vulnerable to exploitation, such as those facinghigher potential pension losses and those working past their maximum


10In the case of continuous independent variables, these turn out to be simply the logit coefficients timesP(1 – P), where P is the probability of a correct response (in this case evaluated at the average probability ofa correct response—the mean of the dependent variable). In the case of categorical independent variables,the change in probability is simply the probability when the categorical variable is coded 1 minus the proba-bility when it is coded 0.

11The direct logit coefficients and the tests of significance are given in Appendices 3 and 4, respectively.12Since the seven equations have the same values for the right-hand-side variables, there is no efficiency

gain to estimating them as a system of equations (Greene, 1990:512).

TABLE 2

EFFECT ON PROBABILITY OF EMPLOYEE HAVING ACCURATE PENSION KNOWLEDGE (N = 529)

Dependent Variables (mean in parentheses)

ContributionFormula (0.277)

Benefit Formula(0.626)

Normal Retirement(0.608)

Early Retirement(0.363)

Compulsory Age(0.697)

EligibilityCondition (0.568)

Indexing(0.480)

Age 0.002 0.009** 0.029*** –0.001 0.013*** 0.008** –0.004Female 0.176* –0.033 0.126 0.153 0.035 –0.029 –0.171*[Health same]Health worse –0.025 0.016 0.000 –0.086 –0.015 –0.206** –0.076Health somewhat better 0.048 0.029 0.043 0.126** –0.015 –0.009 0.009Health better –0.091* –0.097 0.042 0.027 –0.156** –0.058 –0.064[Spouse unemployed]No spouse –0.114* 0.089 0.234*** 0.050 0.121* 0.087 0.086Spouse employed –0.048 –0.030 0.081 0.054 0.008 –0.020 –0.027Spouse pension –0.007 –0.050 0.160** 0.090 0.093 –0.070 0.025Spouse separated –0.125 –0.286** 0.135 –0.033 –0.118 –0.025 –0.037Education 0.000 –0.021 0.016 0.018 –0.024 0.014 0.058***Trained –0.075 –0.036 0.042 –0.146** 0.025 –0.150* 0.021[Skilled]Clerical –.033 0.025 –0.052 –0.171* 0.077 –0.070 0.209*Semiprofessional 0.197*** 0.144** 0.001 0.074 0.063 –0.003 0.159**Other occupation 0.040 –0.089 –0.012 –0.101 0.107 –0.099 –0.036Supervisor –0.049 0.018 –0.001 –0.065 –0.093 –0.105 0.037Earnings 0.049* 0.085*** 0.061** 0.024 0.044* 0.057** 0.078***Tenure 0.001 0.003 –0.012** 0.009* –0.002 0.004 0.013**Layoff likely 0.016 0.079 0.138*** 0.123** –0.027 0.016 –0.043[Nuclear]Head office –0.080 –0.180** –0.101 –0.006 –0.018 0.089 –0.107Regional office –0.093** –0.007 –0.356*** 0.014 0.057 0.030 –0.038Pension loss 0.347** 0.221** 0.024 0.078 0.214** 0.318*** 0.257**Beyond maximum

pension0.418*** 0.168 0.163 0.288** –0.120 0.288** 0.372***

NOTE: Change in probabilities evaluated at mean of each dependent variable.*p < 0.10.**p < 0.05.***p < 0.01.

pension wealth, are generally more knowledgeable. As well, those with lesspower (e.g., females, the less educated, nonsupervisors, persons who maybe laid off) are generally no less knowledgeable about their pension rights,and in some cases, they are more knowledgeable. While the strong knowl-edge requirements of the implicit contracting model are not borne out byour data, it is the case that pension knowledge is much higher among thosefor whom the pension constraints are becoming more binding and mattermore to their decision-making process. For example, those facing greateroptions to continue work under the pension plan are most knowledgeableabout plan provisions that satisfy some of the more significant humanresources management goals of employers. These results generally are evi-dent from the positive (and usually statistically significant) relationshipbetween the potential pension loss that could be at stake and knowledgeabout the various pension plan features, most of which can affect thosepotential losses.

Taken together, our results appear most consistent with the insuranceand union preference models. While the average level of knowledge tendsto be quite low, it tends to be highest among those who more highly valuecertain insurance functions of their pension plan (e.g., those likely to belaid off) and among median voters (e.g., older, less mobile workers) andthose in need of protection through the union (e.g., those in poorer health,those facing greater pension losses if terminated). In essence, some pen-sion ignorance on the part of workers is still consistent with pensionsplaying a useful role in the economy.

Conclusions

We find that while the overall level of pension knowledge amongemployees appears quite low, it is quite high among those for whom theknowledge matters most in terms of their behavioral decision making.These includes older workers, persons who do not perceive their health tobe above average, workers with higher skills and earnings, and especiallyemployees who face higher pension losses if they quit or are terminated.

Our results show that rather than being optimal labor contracts thatworkers enter into with full knowledge at the time of employment, final-earnings pension plans are more like contingent claims contracts that arecreated under conditions of imperfect information. As emphasized byGhilarducci (1990), they evolve gradually over time through negotiationand compromise and are influenced by market power. Employees new tothe firm are least knowledgeable about their pension rights and likelyrely on signals such as reputation or the presence of a defined-benefit


pension plan to identify long-term contracting relationships.13 This levelof investment in knowledge may be sufficient given that retirement is aremote issue and the quit decision is relatively costless in terms of lostoptions under the plan early in one’s career. Over time, employees learnabout plan provisions that have the potential for capital losses and likelyaccept these as reasonable risks to bear in light of their retirement insur-ance functions and their growing job rights. Unions can play an impor-tant role in the establishment and development of final-earnings plansbecause they respond to the preferences of median voters, enhance jobrights through various mechanisms, and can more efficiently monitorand represent employee interests over complex and technical pensionplan details than can individuals acting alone. Employers are willing toagree to final-earnings plans because the same plan provisions that per-form an insurance function also facilitate its own recruiting, planning,monitoring, and performance needs. Firms may still be frustrated, how-ever, by the low level of knowledge possessed by the typical worker,since this suggests that such workers may not appreciate the value oftheir defined-benefit pension plan. This could be a reason for firmsemphasizing defined-contribution over defined-benefit plans. Thesedivergent interests, all satisfied by the same plan provisions, can becomea source of conflict and negotiation, a fact borne out by the experience ofthe immediate parties who, for the past 10 years, have been in constantconflict over the appropriate use of surplus monies in the pension fundand in the extent of the employer’s duty to preserve pension rights in theface of massive restructuring and downsizing.

These results suggest that pension knowledge is acquired in a reason-ably rational fashion that pays attention to the costs and benefits ofacquiring that knowledge. While not answering the question of whetherthe degree of pension knowledge is optimal, it does suggest that pensionplans can provide important forms of retirement insurance and satisfy cer-tain human resources management functions of the firm despite the factthat the extent of pension knowledge among the average worker may bequite low. The level of knowledge tends to be quite high among workerswho are making decisions, such as early retirement, that can be affectedby pension plan features. This highlights that pensions are not just a formof savings and insurance; they also can be an important tool of humanresources management.


13This conclusion finds support in our finding that among the 353 respondents who answered the benefitformula question with a response other than “don’t know,” virtually all believed that they had some form ofdefined-benefit plan formula.

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APPENDIX 1

VARIABLE DEFINITIONS

Dependent variablesContribution formula 1 = knows employee contribution formula; 0 = otherwise.Benefit formula 1 = knows final average benefit formula; 0 = otherwise.Normal retirement 1 = knows normal retirement age; 0 = otherwise.Early retirement 1 = knows at least one eligibility condition for early retirement with and

without discount; 0 = otherwise.Compulsory age 1 = knows age of compulsory retirement; 0 = otherwise.Eligibility condition 1 = knows eligibility condition for pension to be received at planned age

of retirement; 0 = otherwise.Indexing 1 = knows ad hoc inflation protection; 0 = otherwise.Index 7 item index of pension knowledge (0–100)Weighted index 7 item weighted index of pension knowledge (0–100)

DemographicAge Age in 1988.Female 1 = female; 0 = male.[Health same] 1 = health same compared to others of similar age; 0 = otherwise.Health worse 1 = health worse compared to others of similar age; 0 = otherwise.Health somewhat better 1 = health somewhat better compared to others of similar age;

0 = otherwise.Health better 1 = health better compared to others of similar age; 0 = otherwise.

Spousal[Spouse unemployed] 1 = spouse not currently employed; 0 = otherwise.No spouse 1 = no spouse; 0 = otherwise.Spouse employed 1 = spouse currently employed but not a member of employer-sponsored

pension; 0 = otherwise.Spouse pension 1 = spouse currently employed and member of employer-sponsored

pension; 0 = otherwise.Spouse separated 1 = divorced or separated from spouse; 0 = otherwise.

JobEducation Years of education.Trained 1 = if ever received firm-specific training; 0 = otherwise.


[Skilled] 1 = skilled trade or craft; 0 = otherwise.Clerical 1 = clerical; 0 = otherwise.Semiprofessional 1 = semiprofessional or technical; 0 = otherwise.Other occupation 1 = other occupation; 0 = otherwise.Supervisor 1 = supervisor; 0 = otherwise.Earnings Average weekly earnings before deductions (in $100).Tenure Years of pensionable service with employer.Layoff likely 1 = high perceived likelihood of being laid off within next five years;

0 = otherwise.[Nuclear] 1 = works in nuclear or thermal division; 0 = otherwise.Head office 1 = works in head office division; 0 = otherwise.Regional office 1 = works in regional office division; 0 = otherwise.

PensionPension loss Pension wealth lost if quit or terminated.Beyond maximum pension 1 = if continue to work beyond when pension wealth maximized;

0 = otherwise.

NOTE: Omitted reference category for variables with more than one category are in square brackets.

APPENDIX 2

COMPONENTS OF WEIGHTED PENSION KNOWLEDGE INDEX

Item Weight Component

Contribution formula 2 Knows employee contribution required. Knows formula for employeecontribution.

Benefit formula 2 Knows defined benefit pension plan. Knows final-average-earnings benefitformula.

Normal retirement 1 Knows normal retirement age is 65.Early retirement 3 Knows plan provides early retirement. Knows one or more eligibility

conditions for early retirement without discount. Knows one or moreeligibility conditions for early retirement with discount.

Compulsory age 2 Knows employer has compulsory retirement policy. Knows employer’scompulsory retirement policy is effective at age 65.

Eligibility condition 5 Knows own pensionable service. Knows own planned age of retirement.Estimate future service at planned age of retirement. Knows retirementprovisions under plan. Knowledge of retirement provisions matchesactual pension eligibility at planned age of retirement.

Indexing 2 Knows benefits are indexed to inflation. Knows indexing based on ad hocadjustments.

Total 17

APPENDIX 3

LOGIT COEFFICIENTS (N = 529)

Dependent Variables

ContributionFormula

BenefitFormula

NormalRetirement

EarlyRetirement

CompulsoryAge

EligibilityCondition Indexing

Age 0.012 0.039 0.122 –0.006 0.060 0.032 –0.015

Female 0.772 –0.137 0.574 0.628 0.174 –0.117 –0.724

Health worse –0.128 0.070 0.000 –0.399 –0.068 –0.839 –0.309

Health somewhatbetter

0.229 0.125 0.183 0.517 –0.071 –0.037 0.035

Health better –0.514 –0.400 0.179 0.116 –0.667 –0.235 –0.261

No spouse –0.680 0.403 1.232 0.212 0.667 0.366 0.347

Spouse employed –0.254 –0.127 0.356 0.227 0.037 –0.081 –0.108

Spouse pension –0.037 –0.207 0.756 0.376 0.490 –0.283 0.100

Spouse separated –0.762 –1.178 0.624 –0.145 –0.514 –0.102 –0.147

Education 0.001 –0.088 0.068 0.077 –0.112 0.056 0.232

Trained –0.412 –0.149 0.181 –0.724 0.120 –0.605 0.083

Clerical –0.171 0.110 –0.214 –0.878 0.400 –0.282 0.875

Semiprofessional 0.857 0.692 0.004 0.308 0.319 –0.012 0.651

Other occupation 0.190 –0.366 –0.049 –0.475 0.582 –0.397 –0.143

Supervisor –0.259 0.076 –0.004 –0.296 –0.412 –0.421 0.149

Earnings 0.231 0.387 0.263 0.104 0.220 0.236 0.315

Tenure 0.006 0.012 –0.050 0.038 –0.009 0.016 0.050

Layoff likely 0.078 0.356 0.636 0.506 –0.126 0.064 –0.175

Head office –0.447 –0.733 –0.412 –0.025 –0.083 0.376 –0.439

Regional office –0.527 –0.031 –1.525 0.060 0.288 0.123 –0.153

Pension loss 1.466 1.197 0.103 0.327 1.492 1.780 1.109

Beyond maxpension

1.784 0.837 0.778 1.186 –0.522 1.508 1.828

Constant –3.473 –3.061 –6.740 –2.660 –2.333 –3.603 –6.059

APPENDIX 4

WALD STATISTICS (N = 529)

Dependent Variables

ContributionFormula

BenefitFormula

NormalRetirement

EarlyRetirement

CompulsoryAge

EligibilityCondition Indexing

Age 0.012 0.039** 0.122*** –0.006 0.060*** 0.032** –0.015

Female 0.772* –0.137 0.574 0.628 0.174 –0.117 –0.724*

Health worse –0.128 0.070 –0.000 –0.399 –0.068 –0.839** –0.309

Health somewhat better 0.229 0.125 0.183 0.517** –0.071 –0.037 0.035

Health better –0.514* –0.400 0.179 0.116 –0.667** –0.235 –0.261

No spouse –0.680* 0.403 1.232*** 0.212 0.667* 0.366 0.347

Spouse employed –0.254 –0.127 0.356 0.227 0.037 –0.081 –0.108

Spouse pension –0.037 –0.207 0.756** 0.376 0.490 –0.283 0.100

Spouse separated –0.762 –1.178** 0.624 –0.145 –0.514 –0.102 –0.147

Education 0.001 –0.088 0.068 0.077 –0.112 0.056 0.232***

Trained –0.412 –0.149 0.181 –0.724** 0.120 –0.605* 0.083

Clerical –0.171 0.110 –0.214 –0.878* 0.400 –0.282 0.875*

Semiprofessional 0.857*** 0.692** 0.004 0.308 0.319 –0.012 0.651**

Other occupation 0.190 –0.366 –0.049 –0.475 0.582 –0.397 –0.143

Supervisor –0.259 0.076 –0.004 –0.296 –0.412 –0.421 0.149

Earnings 0.231* 0.387*** 0.263** 0.104 0.220* 0.236** 0.315***

Tenure 0.006 0.012 –0.050** 0.038* –0.009 0.016 0.050**

Layoff likely 0.078 0.356 0.636*** 0.506** –0.126 0.064 –0.175

Head office –0.447 –0.733** –0.412 –0.025 –0.083 0.376 –0.439

Regional office –0.527** –0.031 –1.525*** 0.060 0.288 0.123 –0.153

Pension loss 1.466** 1.197** 0.103 0.327 1.492** 1.780*** 1.109**

Beyond max pension 1.784*** 0.837 0.778 1.186** –0.522 1.508** 1.828***

Constant –3.473** –3.061** –6.740*** –2.660* –2.333 –3.603** –6.059***

Model Chi Sq 61.700*** 107.153*** 143.633*** 47.511*** 58.022*** 73.415*** 92.034***

*p < 0.10.**p < 0.05.***p < 0.01.

what do employees know about their pension plan?

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