Wharton Pension Research Council Working Papers

Document Type

Working Paper

Date of this Version



In 1980 and 1981, Fischer Black and Irwin Tepper showed that shareholders would gain if corporate defined benefit pension assets were invested in taxable fixed income securities instead of equities. This paper extends this analysis into the cash balance plan arena, concluding that additional shareholder gains arise when plan liabilities mimic equities. A numerical example demonstrates that the present value of riskless gains to shareholders can exceed the entire after-tax value of plan assets. Lack of transparency in actuarial methods and assumptions is shown to impede implementation.

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Copyright/Permission Statement

©2001 Pension Research Council of the Wharton School of the University of Pennsylvania. All Rights Reserved.

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Economics Commons



Date Posted: 13 September 2019