Government pension insurance: the costly illusion
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This paper reviews the current status of the Pension Benefit Guarantee Corporation (PBGC), created by Congress to insure employee retirement income. It also discusses the system of underfunded pension plans that PBGC is meant to protect against, the regulations that permit companies to routinely underfund pensions and to voluntarily terminate their pension plans, and regulatory proposals by the PBGC to correct the situation. The author suggests that government regulations have failed in this case because their power was overestimated. Instead, the key to a strong private pension system and safe retirement income lies in strengthening the market incentives which created the private pension system in the first place, for example by giving pensions a first claim on corporate assets.
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