Underfunding of Defined Benefit Pension Plans and Benefit Guarantee Insurance: An Overview of Theory and Evidence
I review the theoretical literature on defined-benefit pension plans, particularly focusing on the issue of plan underfunding and benefit guarantee insurance schemes. Under reasonable assumptions underfunding can 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 I summarize the ensuing problems of moral hazard and adverse selection. I then discuss the still rather small body of empirical research on the subject and propose directions for future research.
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Volume (Year): 34 (2008)
Issue (Month): s1 (November)
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References listed on IDEAS
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- Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1994. "The Role of Pensions in the Labor Market: A Survey of the Literature," ILR Review, Cornell University, ILR School, vol. 47(3), pages 417-438, April.
- David W. Wilcox, 2006. "Reforming the Defined-Benefit Pension System," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 235-304.
- Jeffrey R. Brown, 2008.
"Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation,"
Journal of Economic Perspectives,
American Economic Association, vol. 22(1), pages 177-198, Winter.
- Jeffrey R. Brown, 2007. "Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation," NBER Working Papers 13438, National Bureau of Economic Research, Inc.
- Cooper, Russell W. & Ross, Thomas W., 2001. "Pensions: theories of underfunding," Labour Economics, Elsevier, vol. 8(6), pages 667-689, December.
- Niehaus, Gregory R., 1990. "The PBGC's flat fee schedule, moral hazard, and promised pension benefits," Journal of Banking & Finance, Elsevier, vol. 14(1), pages 55-68, March. Full references (including those not matched with items on IDEAS)