Defined Benefit Plans

___________________________________

SOCIAL SCIENCE RESEARCH NETWORK

EMPLOYEE BENEFITS, COMPENSATION & PENSION LAW ABSTRACTS
Sponsored by Pension Governance, LLC
Vol. 8, No. 27: August 16, 2007

Editor: PAMELA J. PERUN
Policy Director, Aspen Institute - Initiative on
Financial Security
PAMELA@PLANETNOW.COM
_________________________________________________________________

BROWSE all abstracts in this subject:
http://www.ssrn.com/link/benefits-compensation-pension-law.html

SEARCH entire eLibrary at: http://ssrn.com/search

If this document is misaligned, please set type face to a
non-proportional font such as Courier 10.
_________________________________________________________________

Pension Governance, LLC is an independent information and
business consulting services and research/analysis company for
the pension community. News, interviews, white papers, surveys,
training and industry events provide pension decision-makers,
their attorneys, actuaries, auditors, consultants, money managers
and third party administrators with information that is
straightforward and created with investment fiduciary best
practices in mind. To learn more, please visit
http://www.pensiongovernance.com,
http://www.pensionriskmatters.com (blog) and
http://www.pensionlitigationdata.com.

Topic of This Issue:
Defined Benefit Plans
_________________________________________________________________

T A B L E O F C O N T E N T S

"Conceptualizing the Defined Benefit Pension Promise:
Implications from a Survey of Expert Opinion"
GORDON LESLIE CLARK
Oxford University Center for the Environment
ASHBY MONK
University of Oxford

"Perspectives: Why Not Trade Pension Claims?"
BERNARD DUMAS
INSEAD, Centre for Economic Policy Research (CEPR),
National Bureau of Economic Research (NBER), Swiss
Finance Institute
JUERG M. SYZ
Cantonal Bank of Zurich

"Should Defined Benefit Pension Schemes Be Career Average or
Final Salary?"
CHARLES SUTCLIFFE
University of Reading - ICMA Centre

"Experts Track Continuing Evolution of U.S. Pension System"
JOHN A. MACDONALD
Employee Benefit Research Institute (EBRI)

"Must We Teach Abstinence? Pensions' Relationship Investments and
the Lessons of Fiduciary Duty"
ETHAN STONE
University of Iowa - College of Law

"Retirement Income Adequacy After PPA and FAS 158: Part One--Plan
Sponsors' Reactions"
JACK VANDERHEI
Temple University - Risk Management & Insurance &
Actuarial Science, Employee Benefit Research Institute
(EBRI)
_________________________________________________________________

"Conceptualizing the Defined Benefit Pension Promise:
Implications from a Survey of Expert Opinion"

Contact: GORDON LESLIE CLARK
Oxford University Center for the Environment
Email: gordon.clark@geog.ox.ac.uk
Auth-Page: http://ssrn.com/author=15154

Co-Author: ASHBY MONK
University of Oxford
Email: ashby.monk@chch.ox.ac.uk
Auth-Page: http://ssrn.com/author=638380

Full Text: http://ssrn.com/abstract=1004743

ABSTRACT: The long-term transition from defined benefit (DB) to
defined contribution occupational pensions has been the subject
of academic and industry research. Even so, there remains
considerable debate about the causes and consequences of this
transformation including whether the DB institution is in
terminal decline, the significance or otherwise of global market
competition for the willingness of private plan sponsors to offer
what are, after all, open-ended commitments, and whether those
commitments could be or should be discounted given the balance
that must be struck between competing interests embedded in the
pension promise. These issues are explored using a unique survey
of over 1260 US experts in the field of pension financing and
provision. It is shown that there is common agreement on many
issues including the pressures being brought to bear on corporate
plan sponsors by global market competition. But it is also shown
that there is disagreement on crucial issues especially whether
private plan sponsors are obliged to carry through on pension
promises made as much as 50 years ago. These results suggest that
apparent disagreements amongst experts over the current
predicament and future of DB pensions in the private sector
represents disagreement about the very nature of the pension
promise. Those who hold to a strong version of the pension
promise hold to, in fact, a quite specific relational model of
modern capitalism.
______________________________

"Perspectives: Why Not Trade Pension Claims?"
Financial Analysts Journal, Vol. 63, No. 1, pp. 46-54,
January/February 2007

Author: BERNARD DUMAS
INSEAD, Centre for Economic Policy Research (CEPR),
National Bureau of Economic Research (NBER), Swiss
Finance Institute
Email: bernard.dumas@insead.edu
Auth-Page: http://ssrn.com/author=30590

Co-Author: JUERG M. SYZ
Cantonal Bank of Zurich
Email: juerg.syz@zkb.ch
Auth-Page: http://ssrn.com/author=507511

Abstract: http://ssrn.com/abstract=960550

ABSTRACT: Trading pension claims would serve many purposes.
Beneficiaries would be able to diversify the idiosyncratic credit
risk of their plan sponsors. And systematic risk could be
reallocated to comply with individual risk?return preferences.
The result would be an alignment of companies' and pension fund
managers' incentives to keep fund plans fully funded - in line
with beneficiary interests - which would lower agency costs and
costs of government bailouts of defined-benefit plans and would
improve the general welfare. As an accurate valuation of pension
liabilities, trading would provide a measurable yardstick for
plan managers.
______________________________

"Should Defined Benefit Pension Schemes Be Career Average or
Final Salary?"
ICMA Discussion Paper No. 2007-6

Contact: CHARLES SUTCLIFFE
University of Reading - ICMA Centre
Email: C.M.S.Sutcliffe@rdg.ac.uk
Auth-Page: http://ssrn.com/author=85971

Full Text: http://ssrn.com/abstract=1000526

ABSTRACT: There is widespread dissatisfaction amongst employers
with defined benefit pension schemes, and many are switching to
defined contribution schemes. Career average is a form of defined
benefit scheme that has some important advantages over final
salary schemes. The comparison of career average and final salary
schemes is a neglected area, and this paper offers one of the
first in-depth analyses of this topic. It considers the
advantages and disadvantages of a cost neutral switch to a career
average revalued earnings (CARE) scheme.
______________________________

"Experts Track Continuing Evolution of U.S. Pension System"
EBRI Notes, Vol. 28, No. 7, July 2007

Contact: JOHN A. MACDONALD
Employee Benefit Research Institute (EBRI)
Email: macdonald@ebri.org
Auth-Page: http://ssrn.com/author=510965

Full Text: http://ssrn.com/abstract=1002650

ABSTRACT: The Employee Benefit Research Institute's spring 2007
policy forum, held in Washington, DC, focused on how retirement
plan sponsors are reacting to and dealing with major developments
in the pension world: Enactment of the Pension Protection Act
(PPA) of 2006, which imposed new funding rules on pension plans
(among other things), and major new accounting rules issued by
the private-sector Financial Accounting Standards Board (FASB)
and the public-sector Government Accounting Standards Board
(GASB). This paper recaps the experts' reactions -- at EBRI's
spring 2007 policy forum -- to these major developments. Change
has been a near-constant in the U.S. pension system, the experts
noted. One theme emerged at the policy forum: New accounting
rules -- rather than new pension funding laws by Congress -- may
be the determining factor that triggers the next big shake-up in
pension coverage.
______________________________

"Must We Teach Abstinence? Pensions' Relationship Investments and
the Lessons of Fiduciary Duty"
Columbia Law Review, Vol. 94, p. 2222, November 1994

Contact: ETHAN STONE
University of Iowa - College of Law
Email: ethan-stone@uiowa.edu
Auth-Page: http://ssrn.com/author=349185

Full Text: http://ssrn.com/abstract=1002101

ABSTRACT: Commentators have speculated that pension funds do not
act as activist investors because of the constraints of fiduciary
duties under ERISA. This note examines the case law under ERISA
and the common law of trusts on which it is based and concludes
that there are no legal constraints. The institutional incentives
of the people who manage pension funds seem a better explanation
for their inactivity (assuming that activism is, in fact,
cost-justified).
______________________________

"Retirement Income Adequacy After PPA and FAS 158: Part One--Plan
Sponsors' Reactions"
EBRI Issue Brief, No. 307, July 2007

Contact: JACK VANDERHEI
Temple University - Risk Management & Insurance &
Actuarial Science, Employee Benefit Research
Institute (EBRI)
Email: TEMPLE@VANDERHEI.COM
Auth-Page: http://ssrn.com/author=265706

Full Text: http://ssrn.com/abstract=1002643

ABSTRACT: This paper provides an overview of the major provisions
of the Pension Protection Act of 2006 and the pension accounting
changes for single-employer defined benefit plans, as well as an
explanation of the expected impact of each on plan sponsors. The
results of the recent EBRI/Mercer Survey of Retirement Program
Changes After PPA and New Accounting Rules are then summarized
with a focus on those results that will be most important for
determining retirement income adequacy in the post-PPA/FAS 158
era. In a forthcoming paper, EBRI will use these results to
modify its retirement security modeling programs to simulate the
impact of PPA and FASB on retirement income adequacy under a
number of alternative scenarios. This will allow policymakers,
retirement professionals, and the news media the opportunity to
analyze these results in a timely fashion before most of the
workers affected by these changes reach retirement age.
__________________________________________________