Pension Benefit Guarantees in the United States: A Functional Analysis

Ray Schmitt, The Future of Pensions in the United States, University of Pennsylvania Press, Philadelphia, 1993.

21 Pages Posted: 8 Feb 2019

See all articles by Zvi Bodie

Zvi Bodie

Boston University - Department of Finance & Economics

Robert C. Merton

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Harvard Business School - Finance Unit

Date Written: January 26, 1993

Abstract

In this paper we use functional analysis to examine the pension benefit guarantee system in the United States. The functional perspective on financial policy making begins with the set offunctions required, and then looks for the optimal institutional structure to perform those functions. Our analysis begins with a brief description of the functions served by the pension system and of the institutional structure currently in place to perform those functions in the United States. We explore the roles of the government and the private sector in providing retirement-income security and the complex interaction between them. The paper then focuses on the federal system for insuring private-sector defined-benefit pension promises against default risk. Finally, we consider how pension benefits might be adjusted for changes in both the cost of living and the standard of living.

Keywords: defined benefit, defined contribution, functional perspective, guarantees

JEL Classification: G23, G28

Suggested Citation

Bodie, Zvi and Merton, Robert C., Pension Benefit Guarantees in the United States: A Functional Analysis (January 26, 1993). Ray Schmitt, The Future of Pensions in the United States, University of Pennsylvania Press, Philadelphia, 1993.. Available at SSRN: https://ssrn.com/abstract=3323476

Zvi Bodie (Contact Author)

Boston University - Department of Finance & Economics ( email )

United States

HOME PAGE: http://www.zvibodie.com

Robert C. Merton

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Avenue
E62-634
Cambridge, MA 02139-4307
United States
617 715 4866 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6678 (Phone)

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