Economic Consequences of Pension Bailouts: Evidence from the American Rescue Plan
By Michael Dambra, Phillip J. Quinn & John Wertz
Multiemployer pension plans (MEPPs) provide retirement benefits for 11 million participants, yet until recently, hundreds of these pension plans – covering 3 million participants – faced insolvency. We use the 2021 passage of the American Rescue Plan Act to examine how pension bailouts affect the management and administration of pension plans. Consistent with the ARP inducing moral hazard, we find that MEPPs increase risk taking in investment allocations, increase benefit payments, and increase administrative fees relative to single-employer pension plans which did not receive bailout funds. The economic magnitudes we estimate are significant, with MEPPs collectively increasing their holdings of high-risk assets by $30.5 billion.
Source SSRN
