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Defeasing Legacy Costs

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  • Richard Berner
  • Michael Peskin

Abstract

The authors propose a new way to defease the legacy costs of America's defined benefit pension system that will help ensure its viability. The proposal would allow companies to exchange their legacy pension debt for another liability with more attractive terms—to the benefit of the sponsor, the Pension Benefit Guaranty Corporation (PBGC), and the plan participants. The transparency gained by separating the past from future liabilities will give better insight into sponsors' balance sheets. And it could take the PBGC out of the impossible position of insuring against events over which the insured have considerable control.

Suggested Citation

  • Richard Berner & Michael Peskin, 2006. "Defeasing Legacy Costs," Journal of Applied Corporate Finance, Morgan Stanley, vol. 18(1), pages 104-107, March.
    • Handle: RePEc:bla:jacrfn:v:18:y:2006:i:1:p:104-107
    DOI: 10.1111/j.1745-6622.2006.00078.x
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