Shi and colleagues analyze the effects of pension buyouts on employees and retirees by comparing expected pension default losses before and after a buyout. Using a market-calibrated stochastic model, they find that retirees covered by annuities after a buyout often face greater financial risk due to weaker state-level insurance protections compared to the Pension Benefit Guaranty Corporation (PBGC). Meanwhile, employee welfare varies based on employer default risk and pension funding status. The study highlights the need for improved regulatory oversight to ensure pension buyouts do not disproportionately disadvantage retirees.
Do pension buyouts help or hurt employees (retirees)?
