Funding

Pension Finance Resources (Home) Page | Key Points | Changes Needed in Actuarial Practice | Accounting | Funding | Investments | Plan Design | Public Funds | Views of Others

(Note: Where available, an online link to the resource is provided; in some cases, we are only able to provide the reference information)

• Assumed Rates of Discount for Valuations of Publicly Sponsored Defined Benefit Plans

This paper uses arbitrage principles to show that the use of expected returns including equity premia is biased in favor of early generations at the expense of later generations, a wealth transfer disguised as risk diversification over time. It is shown that unbiased results can be developed, with no wealth transfers between generations, by assuming risk-free rates of return independently of the actual asset mix.

• Comments to the ERISA Advisory Council

(page 7)

• Final Report of the Task Force on Pension Plan Funding (Canadian Institute of Actuaries)

This report raises some fundamental questions regarding pension funding that this Task Force believes the actuarial profession must resolve.

• How to Stop the Insanity!

(page 6)
This article attempts to identify and delimit the public's interest in defined benefit plan funding.

• Interest Rates: Current Liability, Lump Sums, And Others

Panelists at the Society of Actuaries' 2002 Spring Meeting in San Francisco discuss current understanding of interest rate issues, recent regulatory changes, adaptation to these changes and possible direction of additional legislation.

• Managing Volatility in a Mark–to–Market World: The Stochastic Funding Method

This paper analyzes the likely increase in volatility for a representative plan and then considers the implications of adopting a hedged portfolio as a means of reducing the increased volatility.

• Never Again–A Transition to a Secure Private Pension System

This paper proposes full funding after an n–year transition period, using a bond-for-bond exchange to bring capital market discipline and transparency to the process.

On the Management of Financial Guarantees
From the Winter 1992 Market Microstructure and Corporate Finance Special Issue of Financial Management.

• Pension Deficits: An Unnecessary Evil

This paper looks at how financial economics calls for fully funding and immunizing accrued pensions.

• Rationalizing the Security and Ultimate Delivery of Promised Private Retirement Plan Benefits: The Missing Asset

This paper asserts that funding is the natural result of managing liability. The paper argues that (1) thinly capitalized entities should not be involved in the business of insurance and/or annuities, (2) all investments are promissory notes based on the anticipated values of future earnings, (3) the single most important promissory note is missing from the portfolio of every North American private retirement plan, and (4) retirement plan security should not limit the rights of employees and employers to bargain over pay and benefits. The ramifications of these arguments are discussed.

• What Should We do About the PBGC?

This article challenges the prevailing belief that over the long run, equities are virtually certain to offer a higher rate of return than bonds, and that the risk of a shortfall is negligible.

What the Pension Benefit Guaranty Corporation Can Learn from the Federal Savings and Loan Insurance Corporation
This paper attempts to draw attention to some important lessons that the Pension Benefit Guaranty Coroporation (PBGC) can learn from the experience of the Federal Savings and Loan Insurance Corporation (FSLIC).

• When is a Pension Plan Adequately Funded?