Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation

Jeffrey Robert Brown ()

No 13438, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the economic rationale for, historical experience of, and current pressures facing the Pension Benefit Guaranty Corporation (PBGC). The PBGC is the government entity which partially insures participants in private-sector defined benefit pension plans against the loss of pension benefits in the event that the plan sponsor experiences financial distress and has an under-funded pension plan. The paper discusses three major flaws of the PBGC, namely, that the PBGC has: 1) failed to properly price insurance and thus encouraged excessive risk-taking by plan sponsors; 2) failed to promote adequate funding of pension obligations; and 3) failed to promote sufficient information disclosure to market participants. The paper then discusses potential ways to reform the PBGC so that it operates more in concert with basic economic principles.

JEL-codes: G18 G22 G23 H32 (search for similar items in EconPapers)
Date: 2007-09
Note: AG PE
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Journal Article: Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation (2008)
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