Determinants of defined-benefit pension plan policies∗

I test the degree that variables related to pension insurance, corporate income tax and financial slack considerations determine the contributions, funding levels, and actu-arial assumptions associated with defined-benefit pension plans. Using a large sample of pension data and improved proxies for testing the various hypotheses, my findings suggest that pension contributions decline with increased bankruptcy probability, and that increased bankruptcy probability and reduced taxes impact plan funding levels and actuarial assumptions. My findings are particularly consistent with the effects of pension insurance, in contrast to earlier studies. This suggests that the implications of earlier research are not robust to my expanded set of data and improved proxies. ∗I am grateful for the invaluable guidance and comments of my dissertation committee: Cliff Smit