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The Impact of the Financial Crisis on Defined Benefit Plans and the Need for Counter-Cyclical Funding Regulations


  • Juan Yermo


  • Clara Severinson



Three essential goals of pension plan funding are the long-term viability, stability and security of member benefits. Reform of funding regulations for defined benefit (DB) pension schemes to make them more counter-cyclical in nature can help achieve these goals as well as make DB schemes more attractive to plan sponsors that are increasingly moving away from DB towards defined contribution plans. If designed properly, funding regulations could help maintain DB systems for the long-term and provide greater member security. Broadly speaking, DB funding regulations should (i) encourage deficit reduction contributions and appropriate build up of surplus when plan sponsor finances are strong; (ii) help maintain predictable costs and dampen volatility; and, (iii) give plan sponsors more control to manage risks and costs. This paper discusses the impact of the crisis on DB pension schemes and the temporary responses taken by regulators to help ease financially strained plan sponsors. Furthermore, the paper presents suggestions to governments and policy-makers for making funding regulations more counter-cyclical in nature. Such measures could strengthen the security of DB benefits and help to maintain DB plans for future workers. Répercussions de la crise financière sur les plans à prestations définies et nécessité d'imposer des règles de financement à caractère anticyclique Le financement des plans de retraite obéit à trois objectifs essentiels : viabilité à long terme, stabilité et sécurité des prestations servies aux adhérents. Réformer les règles de financement des régimes de retraite à prestations définies pour renforcer leur nature anticyclique peut contribuer à atteindre ces objectifs et à rehausser leur attrait pour les promoteurs des plans qui s’en détournent de plus en plus au profit des dispositifs à cotisations définies. Si elles sont bien conçues, ces règles de financement pourraient permettre de préserver les systèmes à prestations définies sur un horizon lointain et d’apporter aux adhérents une sécurité accrue. D’une manière générale, les règles de financement des mécanismes à prestations définies doivent (i) favoriser la fixation de cotisations de nature à réduire le déficit de financement, ainsi que la constitution d’excédents à bon escient lorsque la situation financière du promoteur du plan est satisfaisante ; (ii) favoriser la prévisibilité des coûts et atténuer les phénomènes d’instabilité ; et (iii) donner davantage de latitude aux promoteurs pour gérer les risques et les coûts. Le présent document contient une analyse des répercussions de la crise sur les régimes de retraite à prestations définies, ainsi que des mesures provisoires adoptées par les autorités de tutelle pour aider les promoteurs de plans qui connaissent des difficultés financières. On y trouvera également des propositions utiles aux pouvoirs publics et aux décideurs pour accentuer le caractère anticyclique des règles de financement. De telles mesures pourraient accroître la sécurité des prestations servies par les dispositifs à prestations définies et contribuer à préserver ces plans pour les travailleurs de demain.

Suggested Citation

  • Juan Yermo & Clara Severinson, 2010. "The Impact of the Financial Crisis on Defined Benefit Plans and the Need for Counter-Cyclical Funding Regulations," OECD Working Papers on Finance, Insurance and Private Pensions 3, OECD Publishing.
  • Handle: RePEc:oec:dafaad:3-en

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    Cited by:

    1. Söhnke M. Bartram, 2016. "Corporate Post-Retirement Benefit Plans and Leverage," Review of Finance, European Finance Association, vol. 20(2), pages 575-629.
    2. repec:ces:ifodic:v:13:y:2015:i:02:p:36-41 is not listed on IDEAS
    3. repec:ces:ifodic:v:13:y:2015:i:2:p:19166297 is not listed on IDEAS
    4. Aaron George Grech, 2015. "The Financial Crisis and Differences in State Pension Generosity across EU Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(2), pages 36-41, 08.

    More about this item


    anticyclique; contribution; cotisation; counter-cyclical; crise financière; deficit; defined benefit; déficit; excédent; financement; financial crisis; funding; marked-to-market; pensions; prestations définies; regulation; retraites; réglementation; surplus; valorisation au prix du marché;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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