Corporate Pension Policy and the Value of Pbgc Insurance

40 Pages Posted: 7 Apr 2004 Last revised: 26 Sep 2008

See all articles by Alan J. Marcus

Alan J. Marcus

Boston College - Department of Finance

Date Written: October 1983

Abstract

This paper derives the value of PBGC pension insurance under two scenarios of interest. The first allows for voluntary plan termination, which appears to be legal under current statutes. In the second scenario, termination is prohibited unless the firm is bankrupt. Optimal pension funding strategy under each scenario is examined. Finally,empirical estimates of PBGC liabilities are calculated. These show that a small number of funds account for a large fraction of total prospective PBGC liabilities, that those total liabilities greatly exceed current PBGC reserves for plan terminations, and that PBGC liabilities could be substantially reduced by the prohibition of voluntary termination.

Suggested Citation

Marcus, Alan J., Corporate Pension Policy and the Value of Pbgc Insurance (October 1983). NBER Working Paper No. w1217. Available at SSRN: https://ssrn.com/abstract=314621

Alan J. Marcus (Contact Author)

Boston College - Department of Finance ( email )

Fulton Hall
Chestnut Hill, MA 02467
United States
617-552-2767 (Phone)
617-552-0431 (Fax)

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