Chapter

The Declining Role of Private Defined Benefit Pension Plans: Who Is Affected, and How

Craig Copeland and Jack VanDerhei

in Reorienting Retirement Risk Management

Published in print August 2010 | ISBN: 9780199592609
Published online September 2010 | e-ISBN: 9780191594618 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199592609.003.0007
The Declining Role of Private Defined Benefit Pension Plans: Who Is Affected, and How

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This chapter analyzes the impact of future freezes among corporate defined benefit (DB) pension plans. The authors simulate the impact on expected future pension wealth by assuming all existing private DB plans immediately freeze accruals for new employees. While this indicates the potential reduction in retirement wealth attributable to such plans, it does not recognize that sponsors freezing accruals may increase employer contributions to existing defined contribution (DC) plans or establish new DC plans. Using an empirical distribution of enhanced contributions to DC plans from sponsors freezing their DB plans, they evaluate the nominal annuity that could be purchased at retirement age from these enhanced contributions and back out the net pension loss experienced by employees in the future.

Keywords: pension freeze; pension wealth; defined contribution; defined benefit; annuity; pension loss

Chapter.  4985 words.  Illustrated.

Subjects: Pensions

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