Risk-Sharing Alternatives for Pension Plan Design: An Overview and Case Studies
Published in Mitchell, O. and R. Shea (Eds.) (2016). Reimagining Pensions: The Next 40 Years. Oxford, UK: Oxford University Press.
Posted: 14 Nov 2014 Last revised: 3 Apr 2020
Date Written: September 1, 2014
Abstract
Pension plan designs range from those that place virtually all of the risk on the plan (and plan sponsor) to those that place all of the risk on the individual covered by the plan. Traditional plans include designs that are at both ends of this spectrum, but there is increasing attention to plans that share risk. This chapter identifies different risks and discusses methods of sharing risk, both traditionally and in recent plan designs. Two case studies illustrate recent developments. We include a discussion of future directions.
Keywords: Pension plan risk, risk sharing, pension plan design, defined benefit, defined contribution, risk adjustment, hybrid plan
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