We confirm previous findings that as the pension plan size increases, admin
istrative costs per participant and asset fall after controlling for the pr
oportion of retirees in a plan. However, we question the inference that the
high costs of administering small plans partly explains why small firms ge
nerally do not sponsor pension plans. This study uses Internal Revenue Serv
ice annual data to compare the administrative costs of Taft-Hartley plans f
rom 1981 to 1993, Centralization may save costs but also may inhibit format
ion. Union plans are naturally small; they form at the local level.