Participant-Mix and Management of Qualified Pension Plans

This paper examines if the management of qualified pension plans is affected by the mix of plan participants. Evidence is presented that defined-benefit pension plans that are dominated by highly compensated employees tend to contribute beyond the minimum amount required under the Internal Revenue C...

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Bibliographic Details
Published in:Accounting and the Public Interest 2009-01, Vol.9 (1), p.100-128
Main Author: Asthana, Sharad C.
Format: Article
Language:English
Subjects:
Accounting
Baby boomers
Beneficiaries
Compensation
Defense contracts
Defined benefit plans
Dilution
Earnings per share
Employees
Funding
Hypotheses
Impact analysis
Investments
Labor unions
Profitability
Profits
Public interest
Qualified pension plans
Retirement income
Social security
Stockholders
Studies
Tax rates
Wages & salaries
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Summary:This paper examines if the management of qualified pension plans is affected by the mix of plan participants. Evidence is presented that defined-benefit pension plans that are dominated by highly compensated employees tend to contribute beyond the minimum amount required under the Internal Revenue Code (flow effect), resulting in overfunded plans (stock effect), and then use of aggressive actuarial assumptions to disguise the overfunding to avoid visibility costs (reporting effect). These effects are less likely when the sponsoring firm has an active labor union (monitoring effect). These findings will be of interest to the federal government, Pension Benefit Guaranty Corporation, employees, and labor unions.
ISSN:1530-9320
1530-9320
DOI:10.2308/api.2009.9.1.100