Underfunding of Defined Benefit Pension Plans and Benefit Guarantee Insurance - An Overview of Theory and Empirics
AbstractWe review the theoretical literature on defined benefit (DB) pension plans, particularly focusing on the issue of plan underfunding and benefit guarantee insurance schemes. The literature shows that underfunding can, under reasonable assumptions, be an equilibrium outcome even in the absence of benefit insurance. The introduction of benefit guarantee funds was a reaction to the problem of underfunding, and we summarize the ensuing standard problems of moral hazard and adverse selection. We briefly discuss the small empirical research on the subject and propose directions for future research.
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Bibliographic InfoPaper provided by York University, Department of Economics in its series Working Papers with number 2007_1.
Length: 13 pages
Date of creation: May 2007
Date of revision:
Defined benefit pension plans; underfunding; pension benefit guarantee;
Other versions of this item:
- Mario Jametti, 2007. "Underfunding of Defined Benefit Pension Plans and Benefit Guarantee Insurance - An Overview of Theory and Empirics," Social and Economic Dimensions of an Aging Population Research Papers 200, McMaster University.
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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