Pension Benefit Security: A Comparison of Solvency Requirements, a Pension Guarantee Fund and Sponsor Support

Broeders, Dirk; Chen, An

doi:10.2139/ssrn.1707495

Cited by 4 publications

(2 citation statements)

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“…Petersen (1996) and Ippolito (2002) already propose that the discount rate for the valuation of the pension liability should reflect funding risk. Broeders (2010) and Broeders and Chen (2013) use contingent claims analysis to value corporate pension liabilities in the presence of funding risk and compare alternative arrangements of securing these liabilities. However, none of these papers attempts to obtain funding spreads and, hence, funding-risk-adjusted discount rates.…”

Section: Introductionmentioning

confidence: 99%

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MANAGING FINANCIALLY DISTRESSED PENSION PLANSINTHE INTERESTOF BENEFICIARIES

Inkmann

Blake

Shi

2015

J of Risk & Insurance

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link MANAGING FINANCIALLY DISTRESSED PENSION PLANS IN THE INTEREST OF BENEFICIARIESJoachim Inkmann David Blake Zhen Shi January 2015 ABSTRACTThe beneficiaries of a corporate defined benefit pension plan in financial distress care about the security of their promised pensions. We propose to value the pension obligations of a corporate defined benefit plan using a discount rate which reflects the funding ability of the pension plan and its sponsoring company, and therefore depends, in part, on the chosen asset allocation. An optimal valuation is determined by a strategic asset allocation which is optimal given the risk premium a representative pension plan member demands for being exposed to funding risk. We provide an empirical application using the General Motors pension plan.

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Section: Introductionmentioning

confidence: 99%

“…Sponsor support is one of the arrangements considered byBroeders and Chen (2013) to secure corporate pension liabilities in the presence of funding risk.…”

mentioning

confidence: 99%