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Premiums of the Pension Benefit Guarantee Corporation and risk-taking by pension plans

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  • Romaniuk, Katarzyna

Abstract

This paper focuses on defining Pension Benefit Guarantee Corporation (PBGC) premiums. We propose an analytical framework to analyze the effect of premium form on risk-taking by sponsoring firms in their pension plans. We show that risk-taking increases (decreases) when a firm's probability of bankruptcy is superior (inferior) to the sum of the underfunding proportion considered in the premium and of the minimum funding requirement parameters, this sum being divided by the level of the guarantee.

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  • Romaniuk, Katarzyna, 2019. "Premiums of the Pension Benefit Guarantee Corporation and risk-taking by pension plans," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 301-307.
    • Handle: RePEc:eee:quaeco:v:74:y:2019:i:c:p:301-307
    DOI: 10.1016/j.qref.2019.01.003
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    More about this item

    Keywords

    PBGC; Policy levers; Premium; Defined benefit pension plan; Risk-taking;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • 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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