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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Peter Menell

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July 1982Economic Implications of ERISA
with Jeremy I. Bulow, Myron S. Scholes: w0927
If the intent of the Employee Retirement Income Security Act, ERISA, was to assure that beneficiaries of insolvent pension plans receive adequate pension benefits, sharp increases in nominal rates of interest have blunted that purpose. Without an increase in these rates, the Pension Benefit Guarantee Corporation, PBGC, the insurance agency established to guarantee benefits, faced large liabilities on the terminations of pension plans. We examine the economics of pension funds and the funding of pension funds before and after the enactment of ERISA. The Act changed the economics of pension funds. The PBGC, the employer, and the employees have interests in the assets of the pension plan. The PBGC can tax corporations to pay off liabilities and to fund guaranteed benefits; employers can termi...

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