Analysis of Pension Funding Under Erisa

71 Pages Posted: 25 May 2006 Last revised: 9 Aug 2010

See all articles by Jeremy Bulow

Jeremy Bulow

Stanford University; National Bureau of Economic Research (NBER)

Date Written: November 1979


This paper begins by describing the tax, funding, and insurance aspects of the Pension Reform Act of 1974. Next, the implications of those laws are analyzed from the standpoint of the funding decision of the firm. The tax advantage of early funding appears to be quite small. Because there are insurance and other reasons (related to asymmetries in the pension law) why firms might wish to underfund their plans, there is no good reason to expect all firms to fund to the limit. The final section discusses the magnitude of the firms' unfunded pension liability, properly defined. This debt is shown to be quite small. A major reason for this is the substantial increase in long- term nominal interest rates, which have decreased the present value of accrued benefits and, equally, unfunded pension obligations.

Suggested Citation

Bulow, Jeremy I., Analysis of Pension Funding Under Erisa (November 1979). NBER Working Paper No. w0402, Available at SSRN:

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