Article Title
Some Perspectives on the Actuarial Adequacy of the Pension Benefit Guarantee Corporation
Document Type
Essays, Studies, and Works
Abstract
This paper analyzes the actuarial adequacy of PBGC in providing insurance coverage to employees participating in single employer, defined benefit pension plans. The first part of this investigation examines the micro and macro economic factors that impact the financial stability and actuarial viability of PBGC. A second section discusses externalities that may contribute to suboptimal premiums and adverse selection for PBGC. A linear control model is introduced to analyze the most effective way PBGC might use its $100 million credit line with the Department of the Treasury. In addition, a model based on the economic theory of clubs develops relationships between the size of a pension, its level of benefits and the motivations of employers to fully fund a plan or lay it off to PBGC. Within this framework, this investigation examines how changes in the actuarial discount rate or the actuarial cost method for valuing postretirement obligations may significantly alter PBGC’s future claim experience and reserve adequacy. The paper concludes with a discussion of possible funding solutions to address potential inadequacies in PBGC reserves against bankrupt plans in the industrial manufacturing sector of the U.S. economy.
Publication Date
Fall 2007
Journal Title
UNIversitas
Volume
3
Issue
1
First Page
1
Last Page
32
Copyright
©2007 Andrew Frank Thompson
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Language
en
File Format
application/pdf
Recommended Citation
Thompson, Andrew Frank
(2007)
"Some Perspectives on the Actuarial Adequacy of the Pension Benefit Guarantee Corporation,"
UNIversitas: Journal of Research, Scholarship, and Creative Activity: Vol. 3:
No.
1, Article 6.
Available at:
https://scholarworks.uni.edu/universitas/vol3/iss1/6
