The PBGC's Policy Levers and the Pension Plan's Risk-Taking: Should the Premium Be Economically Fair?
19 Pages Posted: 14 Feb 2018
Date Written: February 2, 2018
In the presence of a minimum funding requirement or of a PBGC guarantee that is only partial, an economically fair insurance premium decreases the pension plan's risk-taking. When the regulation's risk-neutrality is sought, a premium lower than the economically fair one should be charged. The paper derives the analytical formula defining the adequate form of the premium.
Keywords: PBGC; policy levers; premium; risk-taking
JEL Classification: G22; G23; G28
Suggested Citation: Suggested Citation