Chapter

Corporate Defined Benefit Pension Plans and the Financial Crisis: Impact and Sponsors and Government Reactions

Mark Warshawsky

in Reshaping Retirement Security

Published in print September 2012 | ISBN: 9780199660698
Published online January 2013 | e-ISBN: 9780191745058 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199660698.003.0009

Series: Pensions Research Council

Corporate Defined Benefit Pension Plans and the Financial Crisis: Impact and Sponsors and Government Reactions

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The financial crisis hit corporate defined benefit plans just as the new funding and other provisions of the Pension Protection Act of 2006 were being implemented. Both sponsors and the federal government reacted to the large shortfalls that developed. In this chapter, the impacts and reactions are documented and the implications are evaluated. In particular, plans’ funding status dropped dramatically, sponsors reduced risk in investments, increased contributions, and changed plan design, while premiums paid to the government insurer nearly doubled, and the federal government, through regulations and legislation, provided some temporary and/or conditional funding relief. Because the relief is temporary, and discount rates are projected to remain low, the shortfalls largely remain, dependent on future developments in financial markets. For the longer term, the heightened appreciation for risk has prompted proposals for a new, more flexible plan type called the flexible structured plan along with other changes in government policies.

Keywords: Pension Protection Act; plan sponsors; defined benefit; plan funding; flexible structured pension; pension insurance

Chapter.  9152 words.  Illustrated.

Subjects: Pensions

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