Retirement benefits in small- and medium-sized Japanese enterprises

Abstract

In Japan, the introduction of defined contribution (DC) plans in 2001 and revised defined benefit (DB) plans in 2002 aimed to replace discontinued traditional DB plans. This study utilizes an original survey to assess the effectiveness of these policy changes on the offering of retirement benefits within small and medium-sized enterprises (SMEs), focusing particularly on differences based on firms' foundation years. We examine how the reforms differentially affected firms founded before and after their implementation. Firms established after the reforms had flexibility in designing benefit structures, while earlier-founded firms remained constrained by legacy plans and regulations. Employing a regression discontinuity design (RDD) to ensure robust causal inference, we find that firms founded after the introduction of these plans are significantly more likely to adopt DC plans, independent of other firm characteristics. In contrast, there is no significant difference in adoption rates of revised DB plans between firms founded before and after the policy changes. These results underscore the need for targeted policies and regulatory easing to promote flexible retirement benefit schemes—particularly DC plans—among established SMEs.