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This chapter outlines the plethora of employee issues with which a liquidator must deal, not the least of which concern unions and labor relations. Retention and compensation of key management and staff to operate the business through liquidation are discussed. Termination of employees, collective bargaining agreements, and retirement, health, and other benefit plans in compliance with applicable regulations such as the WARN Act are addressed.

This chapter examines the context and features of occupational pension plans in the Canadian public sector and compares these with their private sector counterparts. Relative to the declining importance of registered pension plans in the private sector, pension coverage rates of public sector employees remain high and their pension plans retain traditional characteristics. Yet funding considerations have brought considerable change to public sector employee pensions. These and other challenges are discussed.

This chapter assesses whether changes in benefit design were influenced by sponsors' desire to control financial risk. It considers several plan financial characteristics that affect risk tolerance and asset allocation decisions, such as the funding ratio, and determines whether these variables influence decisions regarding plan termination and put-back of the contracted-out portion of Employee Pension Funds (EPFs). In particular, the chapter examines the hypothesis that plan sponsors have altered the plan type they offer to control risks in pension management. It is shown that the pension plan's funding ratio, volatility of the plan sponsor's return on equity, and the size of the pension plan relative to the plan sponsor's total assets exert an influence on decisions to change pension plan types.

The crisis in occupational pensions in Britain extend beyond coverage rates and benefit levels. Private-sector sponsors of existing defined-benefit plans face an uncertain future notwithstanding the establishment in 2005 of the Pension Protection Fund. As for the public sector, the unfunded status of many defined-benefit plans raises significant doubts about their long-term viability. Whatever happens to the Turner Report, the pension crisis has just begun; it is bound to dominate domestic politics for another generation. Most private sector employees do not have access to social security entitlements while public sector employees may see their entitlements passed back to central government to become yet another liability on an already overburdened state. This chapter examines the crisis in the British occupational pension system, the link between pensions and modern capitalism, corporate capitalism in a global environment, lessons for public policy, capital market efficiency and occupational pensions in the public sector.

In addition to DB and DC plans, many companies are establishing “hybrid” plans — plans that have features of both DB and DC plans. The first section of this chapter describes several types of hybrid plans, including combined plans, cash balance plans, pension equity plans, and target benefit plans. The second section discusses the controversies surrounding these plans. Sponsors who are considering a cash balance plan should consider both the facts about these plans and the public perception of them.

This chapter outlines the basics of accounting to help pension fund decision makers understand the accounting data typically provided in financial statements. The first section reviews the basics of pension fund accounting and illustrates the key components of pension fund accounting data. The second section examines some of the critical assumptions that are made in pension accounting and how those assumptions may differ from economic reality. Finally, the chapter examines the investment and pension fund management implications of pension fund accounting and shows how accounting-based decisions can be suboptimal for sponsors, plans, and beneficiaries.

This chapter presents an overview of the two major types of pension plans: defined benefit (DB) plans and defined contribution (DC) plans. Under DB plans, the employee receives an annuity at retirement and in which the payment level depends on a formula specified by the plan. DC plans are individual account plans in which a person’s retirement benefit depends on contributions and on investment returns. The discussion of DB plans will focus on how benefits accrue over an employee’s career. The discussion of DC plans will differentiate among the several varieties of this plan type.

This chapter examines the policy implications of managing a defined benefit (DB) plan as a separate entity or as an entity integrated into the sponsoring organization. It shows how the pension liability affects investment policy and how different views on the nature of the labor market lead to different investment policies. In general, the management of DB pension plans should be integrated with the management of the sponsoring organization since the two are closely entwined. However, this will depend on the best interests of plan beneficiaries.

This chapter discusses developments in managing risks in retirement plans. It begins with a brief analysis on why traditional defined benefit pension plans are being abandoned for defined contribution plans. It identifies key risks affecting both types of plans, and how these can be managed. An overview of the studies included in this volume is then presented.

This chapter presents an overview and interpretation of the major laws and regulations for both private and public pension plans. It focuses on three primary areas of compliance: the obligations related to reporting and disclosure; the funding requirements for defined benefit; and the requirements that a private pension plan must satisfy to count as a “qualified” plan under the tax code. The Sarbanes-Oxley Act of 2002 (SOX) is discussed, which has implications of which pension decision makers should be aware.

This chapter begins by defining the strategic asset allocation decision and discussing how the strategic asset allocation should be set. It introduces the factors that should be considered in setting the defined benefit (DB) strategic asset allocation. Theoretical arguments favoring allocations to stocks and bonds are considered, followed by empirical evidence that shows what pension funds actually do. Finally, the allocation of DB assets over time is discussed.

This chapter brings together the literature on pension compensation and optimal portfolio choice to seek solutions to the ‘pension design’ problem. It identifies the factors that must be taken into account when designing pension schemes. It then discusses life cycle models of employee preferences, presents a specific model of this type, and presents some results. It is shown that defined benefit (DB) pension arrangements magnify the risk exposure of an individual to salary risk, and both defined contribution (DC) and DB pension arrangement defer the pay of younger workers to later in their lives. In contrast, DB pensions may be a cost-effective method of compensation for older, less well-educated employees. Promising workers a stake in an underfunded pension plan is an expensive way to pay employees, particularly if the underfunding has no positive impact on effort. Giving workers 401(k) plans holding restricted company stock is also an expensive way to remunerate employees, because they are already heavily exposed to company risk.

This chapter states that a pension plan is a financial intermediary. A pension plan is also a contractual arrangement that employers and unions use to manage employees. It also transfers claims to income from an employee’s working years to his or her retirement years. New patterns of business organization gave rise to what may be called the employee’s pension problem. A pension plan creates financial claims on behalf of employees. The Social Security Act of 1935 had a profound effect on private pension plans because it profoundly changed the employer’s pension problem. The tax rules for retirement plans reduced a high earner’s tax liability. The differences between single-employer and multiemployer pension plans are reviewed. Officials in Congress and the executive branch agreed that federal policy should accommodate pension and welfare-benefit plans.

Today it is natural to associate mutual funds with retirement plans since funds are the largest funding medium for 401(k) and other defined contribution plans, as well as for Individual Retirement Accounts (IRAs). But for many years the retirement market was dominated by defined benefit plans, which did not invest in mutual funds. The revolution in retirement plans began in 1962 when Congress authorized self-employed individuals to establish “Keogh plans.” It accelerated with the enactment of the Employee Retirement Income Security Act of 1974, which created the first IRAs, and took a quantum leap forward in 1978 when Congress authorized the creation of 401(k) plans.

This chapter describes some of the first steps agencies take when starting to implement IPS. All clients who have interest in competitive employment are typically referred to IPS. The agency encourages everyone to think about the possibility of working. The employment coordinator assigns clients to employment specialists’ caseloads to receive IPS services. The goal is to build a collaborative and trusting relationship between the client and employment specialist that is directed toward obtaining competitive employment, part-time or full-time. Employment specialists need good interviewing skills to develop the alliance with the client and provide effective services. Interviewing skills are briefly reviewed. When starting an IPS program, the employment specialists establish relationships with the local Vocational Rehabilitation (VR) office. Some clients who are receiving IPS services may also be eligible for VR services. Coordinating services with other agencies, such as VR, promotes effective service delivery. During the first few meetings, the employment specialist discusses benefits planning, the meaning of disclosure of disability to employers, and interest in family involvement.

Today it is quite natural to associate mutual funds with retirement plans. After all, mutual funds are the largest funding medium for 401(k) and other defined contribution plans as well as for individual retirement accounts (IRAs). Mutual funds constitute one quarter of all U.S. retirement plan assets. The close association between mutual funds and retirement plans is a relatively new phenomenon. For many years, the corporate retirement market was dominated by defined benefit plans, which did not invest to any significant degree in mutual fund shares. Management of the smaller universe of defined contribution plans was dominated by banks and insurance companies, which did not make use of mutual funds. The revolution in retirement plans began quietly in 1962 when Congress permitted self-employed individuals to establish retirement plans. It accelerated with the enactment of the Employee Retirement Income Security Act of 1974, which created the first IRAs, and took a quantum leap forward in 1981 when Congress permitted all workers to have IRAs and the Internal Revenue Service adopted regulations laying the groundwork for 401(k) plans.

This chapter considers the changes in the magnitude and the composition of saving for retirement over the last two decades. It begins with an analysis of aggregate data on retirement plan contributions before turning to microdata and describing patterns in these data. It documents the changes in aggregate retirement saving over the past twenty-five years and describes how these changes are related to the shift from employer-sponsored defined benefit plans to individual-controlled retirement saving. It then investigates whether the shift toward individual retirement saving, and the accumulation of retirement assets in these accounts, has been offset by a reduction in the assets in other retirement saving plans. It shows that the “retirement plan contribution rate” is much greater than the personal saving rate reported in the National Income and Product Accounts (NIPA) in recent years.

This chapter explains the rise of defined-contribution plans, such as 401(k)s, after the late 1970s. In the postwar period, policymakers were determined to quiet labor-management conflicts and establish a regularized labor peace that could take advantage of opportunities in war torn markets. As the capitalist context changed, so did this orientation. By the late 1970s policymakers moved to restrain and depress wages to counter a growing inflation crisis. The chapter shows that the rise of 401(k)s, on the one hand, and the decline of defined-benefit plans, on the other, was the inadvertent result of policymakers attempting to revive America's stagnating and inflationary economy.

Multipillar social security systems consist of two parts: a privately managed funded defined contribution (DC) plan that handles workers' retirement saving and a publicly managed, tax-financed defined benefit plan that prevents poverty, equalizes more broadly, and diversifies risk. The DC plan is, by definition, contributory and designed to ensure that workers' standard of living will not drop dramatically in old age. Some countries impose few constraints on investments or payouts, while other countries impose large constraints to protect ill-informed or myopic workers from making mistakes. The public benefit has varying degrees of links to contributions in different countries. In some cases (e.g. Australia) it is mainly redistributive and financed by general revenues, while in other cases (e.g. the notional defined contribution plans in Sweden and Poland) a stronger link exists between benefits and payroll contributions. The Latin American public pillars offer a mixed approach that falls in between these two extremes. This chapter summarizes the key policy choices a country must make that strongly affect gender outcomes. Ultimately, value judgments are indispensable in making these choices and designing the system.