Pension Conversion, Termination, and Wealth Transfers

22 Pages Posted: 15 Feb 2014

See all articles by Joel T. Harper

Joel T. Harper

Miami University of Ohio - Department of Finance

Stephen D. Treanor

California State University, East Bay

Date Written: March 2014

Abstract

This article explores the motivation to change their defined benefit pension plan by either terminating the plan and replacing it with a defined contribution plan or converting it to a cash balance plan. Using Form 5500 data as well as firm financial data, we find firms wishing to change their defined benefit plans are motivated by potential wealth transfer and tax implications. Firms terminating pension plans tend to have lower potential wealth transfers and lower taxes than firms converting to a cash balance plan, indicating a desire to modify the implicit contract instead of terminating the plan.

Suggested Citation

Harper, Joel T. and Treanor, Stephen D., Pension Conversion, Termination, and Wealth Transfers (March 2014). Journal of Risk and Insurance, Vol. 81, Issue 1, pp. 177-198, 2014, Available at SSRN: https://ssrn.com/abstract=2396235 or http://dx.doi.org/10.1111/j.1539-6975.2012.01497.x

Joel T. Harper (Contact Author)

Miami University of Ohio - Department of Finance ( email )

Oxford, OH 45056
United States

Stephen D. Treanor

California State University, East Bay ( email )

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