Underfunding of Defined Benefit Pension Plans and Benefit Guarantee Insurance - An Overview of Theory and Empirics

Mario Jametti ()

Social and Economic Dimensions of an Aging Population Research Papers from McMaster University

Abstract: We review the theoretical literature on defined benefit (DB) pension plans, particularly focusing on the issue of plan underfunding and benefit guarantee insurance schemes. The literature shows that underfunding can, under reasonable assumptions, 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 we summarize the ensuing standard problems of moral hazard and adverse selection. We briefly discuss the small empirical research on the subject and propose directions for future research.

Keywords: defined benefit pension plans; underfunding; pension benefit guarantee (search for similar items in EconPapers)
JEL-codes: G23 G28 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2007-05
New Economics Papers: this item is included in nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mcm:sedapp:200

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