Do PBGC premiums incent plan sponsors to borrow to fund their pension plans?
In a 2012 Russell Practice Note "To fund now, or to fund later? That is the question" we discussed the carrot and stick approach to pension funding provided in MAP-21. MAP-21 allowed a certain amount of flexibility to pension plan sponsors when determining a contribution schedule, but at the same time, the law also increased PBGC premiums for maintaining an underfunded pension plan. Since that time, the Bipartisan Budget Act of 2013 ("BBA") further increased the premium payable to the PBGC for maintaining an underfunded pension plan.
This Russell Practice Note revisits the question: Should and under what circumstances would it be advantageous for a pension plan to issue debt in order to fund the pension plan?
DECEMBER 2013Download research
Related research:To fund now, or to fund later? That is the question
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