Accession #: 221105


Publication Date:
September 22, 2021
Insight Statement – Protecting Pensioners of Traditional Defined Benefit Plans: A New Approach to Solvency Funding and Benefit Reductions on Plan Wind-up
Other Details:
27 pages.
Serge Charbonneau, FCIA, and Joseph Nunes, FCIA
The current system for winding up underfunded defined benefit (DB) pension plans involves dividing the segregated pension fund among all plan beneficiaries on a pro-rata basis according to the value of their pension entitlement. This means that if the available funds represent, for example, only 90% of the value of the collective promises, then each beneficiary sees a 10% reduction in their pension. This begs the question: Is there is a better approach to addressing underfunded pension plans?