TY  - JOUR
AU  - Brown,Jeffrey R.
TI  - Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13438
PY  - 2007
Y2  - September 2007
UR  - http://www.nber.org/papers/w13438
L1  - http://www.nber.org/papers/w13438.pdf
N1  - Author contact info:
Jeffrey Brown
Department of Finance
University of Illinois at Urbana-Champaign
515 East Gregory Drive
Champaign, IL 61820
Tel: 217/333-3322
E-Mail: brownjr@illinois.edu
AB  - 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.
ER  -