The PBGC's flat fee schedule, moral hazard, and promised pension benefits

The Pension Benefit Guarantee Corporation (PBGC) initially insured private pension benefits in exchange for a premium that was not risk sensitive. This paper derives conditions under which a moral hazard problem caused promised pension benefits to increase. The hypotheses are tested using data on individual pension contracts from the pre- and post-PBGC periods.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/28689/1/0000508.pd