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This paper examines the formation of pension plans from a corporate finance perspective. The theoretical underpinnings for selecting a defined‐benefit or defined‐contribution plan are discussed and used to form empirically testable hypotheses. Linear probability and logit models are used to identify corporate financial characteristics that affect the likelihood of forming a defined‐benefit or defined‐contribution plan. The results strongly indicate that firms with high degrees of debt and intangible assets are least likely to form defined‐benefit plans in a post‐reversion situation, while firm size enhances the probability of forming defined‐benefit plans. The growth in private retirement plans over the past quarter century has made pension fund management a critical concern for many financial managers. The total amount of assets in private pension plans amounted to approximately $150 billion in 1970, while this figure was about $2 trillion in 1989. A corresponding trend to this growth has been an acceleration in the formation of defined‐contribution plans relative to defined‐benefit plans. In 1975 about 29 percent of all plans were defined‐contribution plans, and 71 percent were defined‐benefit plans. In contrast, defined‐contribution plans comprised 55 percent of all plans in 1988, while 45 percent were defined‐benefit plans.1 Gustman and Steinmeier (1987) suggest that the shift to defined‐contribution plans in recent years may be attributable to shifts in jobs in the economy away from the manufacturing sector and toward the service sector. Furthermore, the role of unions, firm size, and administrative costs have also been sighted as factors which partially explain the economy wide shift toward defined‐contribution plans (see Gustman and Steinmeier (1989), Clark and McDermed (1990), and Kruse (1991)). In this paper, we address the pension choice by examining the formation of individual plans from a corporate finance perspective. Specifically, we examine the pension choice issue when firms are faced with making this decision after the termination of an overfunded defined‐benefit plan. The remainder of this paper is organized as follows. Section I discusses the possible motives for selecting one plan over the other, and develops testable hypotheses. The data and methodology are discussed in section II, while section III presents the empirical results. Section IV summarizes and concludes the paper.

The purpose of this paper is to examine the determinants of US firms' postretirement benefits choices.

The paper uses empirical methodology (univariate and multivariate) to test the research hypotheses.

Industry norm, average employee age, financial structure, and firm size are significant factors in the determination of the proportion of compensation that is deferred. Industry norm, financial structure, and firm size are significant factors that determine the percentage of deferred compensation that is negotiated as defined benefits. Finally, industry norm, corporate tax rates, and cash flow help explain the percentage of defined benefits that are paid in the form of retiree health benefit plans.

Data requirements might bias the sample towards larger sized firms. Data availability limits the number of observations in 2000 and 2001.

The trends in post‐retirement benefits reported in this paper are important for policy makers.

These findings have implications for the baby boomers. The trend to offer smaller proportion of compensation as deferred benefits reflects the increasing costs of deferral to the employers. This increases the employees' responsibilities to save on their own. This also would shift the retirees' dependence on the public pension system for their retirement income. The trend to favor defined‐contribution plans instead of defined‐benefit plans reflects the employers' attempts to diversify their risks of paying promised post‐retirement benefits by transferring the risk to the employee. On the other hand, the popularity of defined‐contribution pension plans also reflects the increased Government's incentives to encourage savings via 401‐k plans and employee's willingness to manage their own pension portfolios.

The funding of defined-benefit plans has garnered the attention of academicians, practitioners, and policymakers. Drawing upon agency and organizational control theories, this study investigates the implications of board independence on changes in defined-benefit funding. Using a panel dataset of S&P 500 companies sponsoring defined-benefit plans, the author finds that corporate boards matter. Specifically, CEO duality and outside director representation are associated with year-to-year decreases in defined-benefit funding. Conversely, outside director ownership is related to year-to-year increases in defined-benefit funding. Furthermore, outside director ownership moderated the relationship between outside director representation and defined-benefit funding such that outside director representation is associated with year-to-year increases in defined-benefit plan funding when the percentage of outside director ownership is high.

This paper aims to compare and contrast alternative pension plans in the market place and their status as zakatable wealth or property. These plans differ in terms of who is responsible for providing funds for pension benefit to the retirees upon retirement and who is responsible for bearing investment risk. Whether a pension plan is subject to zakat immediately or upon receipt at retirement depends on immediate accessibility to and ownership of the funds in the account. It makes no difference whether employer and/or the employee is (are) responsible for funding the plan and who bears the investment risk.

Descriptive and analytical methods were used.

There is consensus among Muslim jurists and shariah scholars that mandatory retirement plans offered as a part of compensation and benefit package for a job are subject to zakat when money is received upon retirement and non-mandatory plans offered as replacement for or supplement to employer-sponsored plans with voluntary employee participation are subject to zakat in each year of employment.

There is no prior research work in the extant literature examining zakatability of alternative retirement plans offered in the US marketplace. This paper fills this void and provides a comprehensive survey and analysis of all available retirement plans and their treatment with respect to zakat.

Compensation systems serve a critical role in strategic human resources management, and over the past twenty-five years, there have been an increasing number of public sector reform efforts aimed at better aligning compensation practices with institutional workforce needs. While many past reforms have been performance driven, the nationʼs most recent economic downturn has served as potent catalyst for a renewed focus on public sector compensation, particularly reforms to public sector retirement benefits. However, given the traditional importance of public sector retirement benefits within broader bureaucratic structures, these new reforms hold the potential to substantially alter human capital capacity in the public sector. Using wage and retirement benefit data from the U.S. Census Bureauʼs Current Population Survey and National Compensation Survey, this paper finds that state and local governments face significant threats to their long-term human capital capacity in light of potential benefit reforms that place a disproportionate emphasis upon competitive wage rates.

Defined benefit occupational pension schemes are a valuable employee benefit. This paper looks at problems in their design and considers whether it is possible to address them. The risk profile of money purchase schemes is described, with particular reference to employees in less secure employment categories. These considerations are set alongside the requirements employers have from occupational pension schemes. The conclusion is that money purchase schemes fail to meet employees’ needs, in particular at a time when the security and level of state pensions is being progressively eroded. An alternative defined benefit structure is proposed, that is, the revalued career average pension scheme. It is argued that this benefit structure can be made attractive to both employers and employees, as it addresses many of the problems associated with final salary schemes and provides pension scheme members with the security they value.

This paper aims to argue that the accounting standards’ requirements for the valuation of defined benefit pension schemes in the financial statements of scheme sponsoring companies potentially produce an artificial result which is at odds with the “faithful representation” and “relevance” objectives of these standards.

The approach is a theoretical analysis of the relevant reporting standards with the use of a practical example to demonstrate the impact where trustees adopt a hedged approach to portfolio investment.

Where a pension fund engages in asset liability matching and invests in “risk-free” assets, the term, quantity and duration/maturity of which is intended to match some or all of its scheme liabilities, the required accounting treatment potentially results in the sponsoring company’s financial statements reporting fluctuating surpluses or deficits each year which are potentially ill informed and misleading.

Pension scheme surpluses or deficits reported in the financial statements of listed companies are potentially very significant numbers; however, the dangers posed by theoretical nature of the calculation have largely gone unreported.

The purpose of this paper is to explain how the current “crisis” in the UK pension system arose. I argue that it is a result of a combination of changes in government policy and basic instabilities always inherent in the financial system. Policy changes increased the vulnerability of the pension system to those instabilities. The background to these changes and also the frame of reference in terms of which the “crisis” itself is now phrased is broadly neoliberal. Its theoretical roots are in ideas of the efficiency of free markets. Its policy roots are expressed in a series of similar neoliberal policy tendencies in other capitalist states. I further argue that neoliberal solutions to the pension crisis simply offer more of the very matters that created the problems in the first place. Moreover, the very terms of debate, based in markets, financialisation of saving and individualisation of risk, disguise a more basic debate about providing a living retirement income for all. This is a debate that New Labour is simply not prepared to constructively engage with in any concrete fashion.

The purpose of this paper is to evaluate the relative risks and benefits associated with defined contribution (DC) and defined benefit (DB) pension schemes. New regulatory and governance requirements and demographic changes have all significantly raised the costs and reduced the expected benefits to employers of operating DB schemes. In response, many employers have either closed down their DB schemes, closed the scheme to new members and/or to capped any further accruing of benefits for existing members. This decline in DB schemes and their replacement by less generous DC schemes, has been overwhelmingly seen by employees, the general public and Government as an unwelcome development that shifts significant pension risks from the employer onto the employee.

The paper evaluates claims that DB schemes are less risky than DC schemes and, whether their passing ought to be such a cause of concern.

The paper finds that DC schemes are not inherently riskier than DB schemes. Indeed, it is argued that the low operational, governance and regulatory costs and flexibility of DC schemes provide employers and employees with the most cost‐effective means of saving for a pension. In contrast, despite the appearance that the employer rather than the employee is the primary risk bearer in respect of DB schemes, it is shown that this is largely a fallacy. Such an arrangement merely substitutes an employer's covenant for some portion of an independent (of the employer) investment portfolio. This reliance upon an employer's promises to continue to support and fund the pension scheme imposes a raft of additional firm‐specific (i.e. non‐diversifiable) risks and regulatory and governance costs upon the members of both DB and DC schemes.

The paper provides a topical and useful review of the risks, costs and benefits of DC and DB pension schemes in the UK.

It is well established that Black and Hispanic workers accumulate leszs wealth for retirement than white workers. This study provides evidence on whether racial and ethnic differences in private pension coverage and benefit levels contribute to the wealth differentials. Using data from the Current Population Survey, Survey of Consumer Finances and the Health and Retirement Survey, several consistent findings emerge. First, most of the racial and ethnic differences in pension benefit levels are accounted for by differences in worker charateristics. Second, among workers who are covered by a private pension, racial and ethnic differences in pension asset accumulation are quite small. Finally, exclusion of pension wealth has a small effect on the comparison of average levels of wealth across racial and ethnic groups, but has a substantial effect for comparisons at the bottom of the wealth distribution. Overall, the findings suggest that, holding worker characteristics constant, minority and majority workers accumulate very similar levels of wealth.