Pension Reversions and Worker-Stockholder Wealth Transfers
This paper examines the relative importance of transfers from workers to shareholders in the firm's decision to terminate their overfunded defined benefit pension plans. In contrast to earlier studies, I find evidence that firms terminate their pension plans to relieve themselves of implicit promises to workers of future compensation. In addition, financing and tax considerations influence the reversion decision. The results suggest that the 1986 excise tax on asset reversions reduced termination for reversion by 36 percent in 1986. In 1980 A & P terminated its overfunded pension plan. A & P said it intended to use the excess assets for corporate purposes. The reversion was challenged, but a court decision confirmed a firm's right to terminate its overfunded pension plans. Few plans were terminated for reversion before 1980. The number of terminations for reversion grew dramatically during the early eighties, peaking at 580 in 1985. The number of workers involved in pension reversions has grown from 22,000 in 1980 to just under 700,000 by
- DOI
- 10.2307/2118373
- Volume
- 107 (3)
- Pages
- 1033-1056
- Language
- en
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- crossref openalex