Guaranteed trouble
Subtitle: the economic effects of the pension benefit guaranty corporation
By: Jeffrey R. Brown.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 13438.; Working paper series (National Bureau of Economic Research) -- working paper no. 13438.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 34
Subjects: Pension Benefit Guaranty Corporation -- Economic aspects; Insurance, Pension trust guaranty -- Economic aspects -- United States
Description: This paper examines the economic rationale for, historical experience of, and current pressures facing the Pension Benefit Guaranty Corporation (PBGC). The PBGC is the government entity which partially insures participants in private-sector defined benefit pension plans against the loss of pension benefits in the event that the plan sponsor experiences financial distress and has an under-funded pension plan. The paper discusses three major flaws of the PBGC, namely, that the PBGC has: 1) failed to properly price insurance and thus encouraged excessive risk-taking by plan sponsors; 2) failed to promote adequate funding of pension obligations; and 3) failed to promote sufficient information disclosure to market participants. The paper then discusses potential ways to reform the PBGC so that it operates more in concert with basic economic principles.
Notes: "September 2007"

Includes bibliographical references (p. 27-30).

Also available in PDF from the NBER World Wide Web site (www.nber.org).