A Normative Approach to Pension Fund Management

George M. Frankfurter and Joanne M. Hill

Journal of Financial and Quantitative Analysis, 1981, vol. 16, issue 4, 533-555

Abstract: This paper is concerned with two decisions facing firms with defined benefit, trusteed pension plans: the amount of funds to contribute to the pension fund in any given period; and the selection of a particular mix of assets for that fund. The pension decision area is of importance for many firms today due to the recent rapid growth in pension costs in absolute terms and as a percent of firm profits. Unfunded liabilities (pension benefits payable net of pension assets) have become a sizable component of the capital structure of many firms. Pension funds (assets) also have grown rapidly due to liberalizationof pension benefits, inflation, the higher funding requirements of the pension reform law (ERISA), and the overall aging of the labor force.

Date: 1981
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