US/JAPAN - Freezing defined benefits plans in the US and Japan and relying solely on a defined contribution plan fails to address risks, according to a working paper published by the Pension Research Council.
Authors Elmer Huh and Sarah McLellan said strategies to match assets to liabilities and preserve existing DB plans would be more useful than closing them.
When comparing a contrasting US and Japan corporate pension schemes, Huh and McLellan said both are facing substantial challenges.
They also claimed: “DB plans may become increasingly useful in addressing long-term HR objectives, a goal we expect to become important in an aging world.”
Huh and Mclellan went on to forecast future reforms would respond to accounting standards and pension reform legislation.
“Proactive management teams will need to take pension financing into account when making overall corporate finance decisions, including more tax efficient funding and trading strategies,” they concluded.
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