When a firm sponsoring a defined benefit pension plan approaches financial distress, the Pension Benefit Guaranty Corporation (PBGC) insurance effect materializes and the optimal pension portfolio policy becomes aggressive. In this configuration, a regulation restricting the pension investment...

This article calls attention to the Department of Labor's imposition of the “prudent investor rule” on financial advisers to retirement savers. The article also canvasses the customary role of an investment policy statement in promoting compliance with the prudent investor rule by...

In this paper we compare changes in asset allocations between mutual funds held in defined contribution pension plans and funds held by other investors. We investigate how flows into equity and fixed income mutual funds depend on macroeconomic conditions. We find that defined contribution plans...

In this paper we analyze the impact hedging longevity risk can have on a pension fund's funding ratio volatility and ALM strategy. Our model captures all relevant aspects of the ALM problem and is calibrated to industry statistics; however, we've sacrificed model complexity to make the solution...

This paper investigates retirees' optimal purchases of fixed and variable longevity income annuities using their defined contribution (DC) plan assets and given their expected Social Security benefits. As an alternative, we also evaluate using plan assets to boost Social Security benefits...

A data driven Neural Network (NN) optimization framework is proposed to determine optimal asset allocation during the accumulation phase of a defined contribution pension scheme. In contrast to parametric model based solutions computed by a partial differential equation approach, the proposed...

This paper proposes an innovative retirement product with a focus on longevity risk sharing, a contract we refer to as tail index-linked annuity (TILA). Specifically, the proposed TILA pays out variable annual payments, which will be equal to a regular nominal amount when a reference survival...

This paper evaluates a new variant of the popular target date funds used in employer-based retirement savings plans. We call this new variant a "target retirement plan." Instead of increasing the allocation to bond funds as retirement approaches, a target retirement fund gradually purchases...

We characterize the optimal default fund in a defined contribution (DC) pension plan. Using detailed data on individuals' holdings inside and outside the pension system, we find substantial heterogeneity within and between passive and active investors in terms of labor income, financial wealth,...

We investigate the influence of investment regulations on the riskiness and procyclicality of defined-benefit (DB) pension funds' asset allocations. We provide a global comparison of the regulatory framework for public, corporate and industry pension funds in the US, Canada and the Netherlands....