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Do Highly Compensated Participants Influence The Management Of Qualified Pension Plans?

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  • Sharad Asthana

    (The University of Texas at San Antonio)

Abstract

This paper presents evidence of favorable management of qualified pension plans with large proportion of highly compensated employees. Defined-benefit pension plans that are dominated by highly compensated employees tend to contribute beyond the minimum amount required under Internal Revenue Code (flow effect) resulting in overfunded plans (stock effect) and then use aggressive actuarial assumptions to disguise the overfunding to avoid visibility costs (reporting effect). This favored treatment is less likely when the sponsoring firm has an active labor union (monitoring effect). These actions contradict the provisions under the Employee Retirement Income Security Act and the Internal Revenue Code, which prohibit favorable treatment for highly compensated employees.

Suggested Citation

  • Sharad Asthana, 2007. "Do Highly Compensated Participants Influence The Management Of Qualified Pension Plans?," Working Papers 0025, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0063acc
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    References listed on IDEAS

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    More about this item

    Keywords

    Defined-Benefit Pension plans; highly compensated employees; funding; actuarial assumptions;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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