Pension Benefit Guarantees in the United States : A Functional Analysis

In this paper we use functional analysis to examine the pension benefit guarantee system in the United States. The functional perspective on financial policy making begins with the set offunctions required, and then looks for the optimal institutional structure to perform those functions. Our analysis begins with a brief description of the functions served by the pension system and of the institutional structure currently in place to perform those functions in the United States. We explore the roles of the government and the private sector in providing retirement-income security and the complex interaction between them. The paper then focuses on the federal system for insuring private-sector defined-benefit pension promises against default risk. Finally, we consider how pension benefits might be adjusted for changes in both the cost of living and the standard of living