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   EMPLOYEE BENEFITS, COMPENSATION & PENSION LAW ABSTRACTS
             Sponsored by Pension Governance, LLC
                Vol. 8, No. 25: July 26, 2007

Editor:     PAMELA J. PERUN
              Policy Director, Aspen Institute - Initiative on
              Financial Security
              PAMELA@PLANETNOW.COM
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                     Topic of This Issue:
                       Social Security
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T A B L E    O F    C O N T E N T S

"Notional Defined Contribution Pension Systems in a Stochastic
 Context: Design and Stability"
    ALAN J. AUERBACH
        University of California, Berkeley - Department of
        Economics, National Bureau of Economic Research (NBER),
        CESifo (Center for Economic Studies and Ifo Institute
        for Economic Research)
    RONALD D. LEE
        University of California, Berkeley - Department of
        Demography, National Bureau of Economic Research (NBER)

"Pension Reform, Ownership Structure, and Corporate Governance:
 Evidence from Sweden"
    MARIASSUNTA GIANNETTI
        Stockholm School of Economics, Centre for Economic
        Policy Research (CEPR), European Corporate Governance
        Institute (ECGI)
    LUC LAEVEN
        International Monetary Fund (IMF), Centre for Economic
        Policy Research (CEPR)

"Public Pension Reform: A Primer"
    ALAIN JOUSTEN
        University of Liege - Department of Economics, Centre
        for Economic Policy Research (CEPR), Institute for the
        Study of Labor (IZA), International Monetary Fund (IMF)

"Social Security Reform: Fundamental Restructuring or Incremental
 Change?"
    KATHRYN L. MOORE
        University of Kentucky College of Law

"Effects of After-Tax Pension and Social Security Benefits on
 Household Wealth: Evidence from a Sample of Retirees"
    WILLIAM G. GALE
        The Brookings Institution
    MICHAEL DWORSKY
        Brookings Institution
    JOHN W.R. PHILLIPS
        National Institutes on Aging - Health Scientist
        Administrator
    LESLIE MULLER
        Social Security Administration
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"Notional Defined Contribution Pension Systems in a Stochastic
 Context: Design and Stability"
    NBER Working Paper No. W12805


 Contact:  ALAN J. AUERBACH
             University of California, Berkeley - Department of
             Economics, National Bureau of Economic Research
             (NBER), CESifo (Center for Economic Studies and Ifo
             Institute for Economic Research)
   Email:  auerbach@econ.berkeley.edu
Auth-Page:  http://ssrn.com/author=20523

Co-Author:  RONALD D. LEE
             University of California, Berkeley - Department of
             Demography, National Bureau of Economic Research
             (NBER)
   Email:  rlee@demog.berkeley.edu
Auth-Page:  http://ssrn.com/author=77524

Full Text:  http://ssrn.com/abstract=955238

ABSTRACT: Around the world, Pay-As-You-Go (PAYGO) public pension
programs face serious long-term fiscal problems due primarily to
actual and projected population aging, and most appear
unsustainable as currently structured. Some have proposed the
replacement of such plans with systems of fully funded private or
personal Defined Contribution (DC) accounts, but the difficulties
of transition to funded systems have limited their
implementation. Recently, a new variety of public pension program
known as Notional Defined Contribution or Non-financial Defined
Contribution (NDC) has been created, with the objectives of
addressing the fiscal instability of traditional plans and
mimicking the characteristics of funded DC plans while retaining
PAYGO finance. Using different versions of the system recently
adopted in Sweden, calibrated to US demographic and economic
parameters, we evaluate the success of the NDC approach in
achieving fiscal stability in a stochastic context. (In a
companion paper, we will consider other aspects of the
performance of NDC plans in comparison to traditional PAYGO
pensions.) We find that the basic NDC scheme is effective at
preventing excessive debt accumulation, but does little to
prevent significant asset accumulation along many trajectories
and on average. With adjustment, however, the NDC approach can be
made more stable.
______________________________

"Pension Reform, Ownership Structure, and Corporate Governance:
 Evidence from Sweden"
    ECGI - Finance Working Paper No. 181/2007


 Contact:  MARIASSUNTA GIANNETTI
             Stockholm School of Economics, Centre for Economic
             Policy Research (CEPR), European Corporate
             Governance Institute (ECGI)
   Email:  Mariassunta.Giannetti@hhs.se
Auth-Page:  http://ssrn.com/author=283885

Co-Author:  LUC LAEVEN
             International Monetary Fund (IMF), Centre for
             Economic Policy Research (CEPR)
   Email:  LLAEVEN@IMF.ORG
Auth-Page:  http://ssrn.com/author=261593

Full Text:  http://ssrn.com/abstract=966185

ABSTRACT: Conventional wisdom holds that pension reforms by
increasing institutionalized saving foster stock market
development and improve corporate governance. Sweden offers a
unique natural experiment to analyze the microeconomic effects of
pension reforms on ownership structure, corporate governance and
firm valuation. The Swedish pension reform increased the
participation of pension funds in the domestic stock market and
caused a significant reshuffling in the ownership of the existing
pension funds. The availability of detailed micro data on firm
ownership allows us to document the effects of the pension reform
on ownership structure and corporate governance of listed
companies. We show that firm performance improves if large
independent pension funds and government pension funds increase
their equity stakes, but not if smaller pension funds or pension
funds related to financial institutions and industrial groups
increase their shareholdings. Additionally, controlling
shareholders appear reluctant to relinquish control and the
control premium increases if government pension funds acquire
shares. Our results go against the conventional wisdom suggesting
that an increase in institutionalized saving decreases ownership
concentration and private benefits of controls and suggest that
the structure of the pension fund industry is of crucial
importance for corporate governance.
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"Public Pension Reform: A Primer"
    IMF Working Paper No. 07/28


 Contact:  ALAIN JOUSTEN
             University of Liege - Department of Economics,
             Centre for Economic Policy Research (CEPR),
             Institute for the Study of Labor (IZA),
             International Monetary Fund (IMF)
   Email:  ajousten@ulg.ac.be
Auth-Page:  http://ssrn.com/author=198590

Full Text:  http://ssrn.com/abstract=962467

ABSTRACT: The present paper reviews key issues in pension design
and pension reform encountered all across the world. The paper
heavily refers to the recent U.S. Social Security reform debate
in general and to the Personal Retirement Accounts proposal in
particular. A particular emphasis is put on annuitization and
risk-taking in the economy. Our discussion signals some
inadequacy of the proposed measures with respect to the goals of
viability of the system and individual financial security during
retirement.
______________________________

"Social Security Reform: Fundamental Restructuring or Incremental
 Change?"
    Lewis & Clark Law Review, Vol. 11, No. 2, 2007


 Contact:  KATHRYN L. MOORE
             University of Kentucky College of Law
   Email:  kmoore@pop.uky.edu
Auth-Page:  http://ssrn.com/author=281705

Full Text:  http://ssrn.com/abstract=999368

ABSTRACT: In light of Social Security's long-term deficit, reform
of the system appears inevitable. Commentators and policymakers
have offered a wide range of possible reforms. This Article
describes and analyzes five possible types of reform: (1)
individual accounts, (2) progressive price indexing, (3) general
revenue and/or estate tax revenue financing, (4) increasing the
maximum taxable wage base, and (5) increasing the normal
retirement. The Article opposes the first two proposed changes,
individual accounts and progressive price indexing, because they
would fundamentally restructure the current system. The Article
recommends that Social Security's financing difficulties be
addressed by a combination of estate tax revenue financing, a
higher taxable wage base, and a higher normal retirement age. A
combination of these three reforms would retain the current
structure of the system and distribute the costs of reform so
that no single class of participants or beneficiaries would bear
the entire brunt of reform.
______________________________

"Effects of After-Tax Pension and Social Security Benefits on
 Household Wealth: Evidence from a Sample of Retirees"

 Contact:  WILLIAM G. GALE
             The Brookings Institution
   Email:  WGALE@BROOKINGS.EDU
Auth-Page:  http://ssrn.com/author=51797

Co-Author:  MICHAEL DWORSKY
             Brookings Institution
   Email:  mdworsky@brookings.edu
Auth-Page:  http://ssrn.com/author=693062

Co-Author:  JOHN W.R. PHILLIPS
             National Institutes on Aging - Health Scientist
             Administrator
   Email:  PhillipJ@nia.nih.gov
Auth-Page:  http://ssrn.com/author=381451

Co-Author:  LESLIE MULLER
             Social Security Administration
   Email:  leslie.muller@ssa.gov
Auth-Page:  http://ssrn.com/author=830157

Full Text:  http://ssrn.com/abstract=994920

ABSTRACT: We provide the first estimates of how after-tax defined
benefit plans and social security affect household wealth. The
analysis employs a sample of elderly households with detailed
information on lifetime earnings, and follows several recent
papers in adjusting pension wealth for the life-cycle. These
factors reduce data measurement problems relative to previous
research and provide an estimation framework that is consistent
with economic theory. Using data on married couples from the 1996
SIPP, we find that after-tax pension benefits have little effect
on other wealth among households where the husband did not attend
college, but almost completely crowd out other wealth
accumulation among households where the husband did attend
college.