Pension Conversion, Termination, and Wealth Transfers
Article first published online: 14 FEB 2013
© The Journal of Risk and Insurance, 2013
Journal of Risk and Insurance
How to Cite
Harper, J. T. and Treanor, S. D. (2013), Pension Conversion, Termination, and Wealth Transfers. Journal of Risk and Insurance. doi: 10.1111/j.1539-6975.2012.01497.x
- Article first published online: 14 FEB 2013
This article explores the motivation to change their defined benefit pension plan by either terminating the plan and replacing it with a defined contribution plan or converting it to a cash balance plan. Using Form 5500 data as well as firm financial data, we find firms wishing to change their defined benefit plans are motivated by potential wealth transfer and tax implications. Firms terminating pension plans tend to have lower potential wealth transfers and lower taxes than firms converting to a cash balance plan, indicating a desire to modify the implicit contract instead of terminating the plan.