Do Highly Compensated Participants Influence The Management Of Qualified Pension Plans?
AbstractThis paper presents evidence of favorable management of qualified pension plans with large proportion of highly compensated employees. Defined-benefit pension plans that are dominated by highly compensated employees tend to contribute beyond the minimum amount required under Internal Revenue Code (flow effect) resulting in overfunded plans (stock effect) and then use aggressive actuarial assumptions to disguise the overfunding to avoid visibility costs (reporting effect). This favored treatment is less likely when the sponsoring firm has an active labor union (monitoring effect). These actions contradict the provisions under the Employee Retirement Income Security Act and the Internal Revenue Code, which prohibit favorable treatment for highly compensated employees.
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Bibliographic InfoPaper provided by College of Business, University of Texas at San Antonio in its series Working Papers with number 0025.
Length: 38 pages
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Defined-Benefit Pension plans; highly compensated employees; funding; actuarial assumptions;
Find related papers by JEL classification:
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- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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