IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Reversion Taxes, Contingent Benefits, and the Decline in Pension Funding

Listed author(s):
  • Ippolito, Richard A
Registered author(s):

    The evidence since the mid-1980s contradicts the axiom that firms maximize the arbitrage value of their tax-exempt pension funds. Instead, it suggests the emergence of a new minimum-funding paradigm. A prominent candidate to explain the change is a sequence of escalating reversion taxes enacted between 1986 and 1990. A valuable option to a pension plan sponsor is its ability to cancel the contingent portion of its pension obligations (pension promises beyond those legally required). As a result of reversion taxes, this option value is preserved only if the firm maintains zero excess assets and falls in proportion to the amount of excess assets retained in the pension fund. The potential for this tax policy to profoundly affect the economics of pension funding seems apparent. By 1995, the cumulative effect of the new contribution behavior resulted in a 60 percent reduction in excess pension assets. Copyright 2001 by the University of Chicago.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by University of Chicago Press in its journal Journal of Law & Economics.

    Volume (Year): 44 (2001)
    Issue (Month): 1 (April)
    Pages: 199-232

    in new window

    Handle: RePEc:ucp:jlawec:v:44:y:2001:i:1:p:199-232
    Contact details of provider: Web page:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    in new window

    1. Ippolito, Richard A., 1998. "Pension Plans and Employee Performance," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226384559, March.
    2. Ippolito, Richard A, 1988. "A Study of the Regulatory Effect of the Employee Retirement Income Security Act," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 85-125, April.
    3. repec:bla:joares:v:25:y:1987:i:2:p:317-326 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:v:44:y:2001:i:1:p:199-232. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.