This paper considers the impact that plan design might have on annuitization rates across different plans. The key finding of this study is that differences in DB plan rules or features result in very different annuitization rates in DB plans. In fact, the results show that the rate of annuitization varies directly with the degree to which plan rules restrict the ability to choose a partial or lump-sum distribution. Plans that allow lump-sum distributions have much lower annuitization rates, while those that prohibit or restrict them have much higher annuitization rates. In view of these findings, any study of annuitization that fails to take into account the impact of plan design on participant choice will likely lead to misinterpretations. Distribution option selection data, along with plan-specific information on 84 ERISA-qualified plans, were provided by Aon Hewitt. The data include a total of 118,730 payout decisions between the years 2005 and 2010, including both traditional defined benefit and cash balance plans. The largest plan accounts for only 9.28 percent of the entire sample, such that the results are not distorted by the impact of a few large plans. Combining all the plans across the years 2005-2010, workers who made their payout decision between ages 50 and 75 had a minimum job tenure of five years, a minimum account balance of $5,000, and had an annuitization rate of 65.8 percent. But within this group of workers, those who had no plan restrictions on a lump-sum distribution had an annuitization rate of only 27.3 percent. In all the years studied, plans with no lump-sum distribution (LSD) options have the highest annuitization rates, very close to 100 percent. Traditional defined benefit and cash balance plans with no restrictions on LSDs had the lowest annuitization rates. In 2010, the annuitization rate for all plans combined was 65.5 percent, while for plans with no LSD option it was 98.8 percent; but the annuitization rate for defined benefit plans with no restrictions on LSDs was 44.3 percent, while for cash balance plans with no restrictions on LSDs it was 22.3 percent. For older workers across most plan types, annuitization rates increase steadily with account balance, but this is not the case for younger workers. Annuitization rates also increase with tenure, but for younger workers (20-50) with low tenure (less than 10 years), annuitization rates are very low. For older workers (50-75), annuitization rates are higher even in cases of low tenure. Annuitization rates are very low for those below age 40, but from that point onwards, annuitization rates increase for all types of plans. Annuitization rates appear to peak between 65 and 69, but then fall sharply
