Overfunded plans: although enticing, here's a look at the other side of pension asset reversions

Article Abstract:

Prior to dissolving an overfunded pension benefit plan in order to improve corporate cash flow (through the recapture of plan assets by the company), a controller should analyze the following factors: what occasioned the surplus assets in the benefit plan, the economic performance of the surplus assets to be acquired, whether the plan will be replaced with another benefit package (and what the funding requirements of the replacement plan will be), the effect of the asset reversion on the company's tax base, and the expense of vesting nonvested participants prior to plan termination. Controllers and other financial executives should realize that termination of overfunded plans may not always be in the company's best interests.

Economic aspects, Pension funds, Controllership

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A Comment on Optimizing Municipal Bond Bids

Article Abstract:

A recent paper on optimizing municipal bond bids used an integer programming formulation. Net interest cost does not consider the time value of money. The simple constant coupon solution is not universally appealing. Another solution is to let the bank design the payment sequence and security characteristics and then have others bid on the package.

Packaging, Municipal bonds

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A Comment on Implementing Mean-Variance Theory in the Selection of U.S. Government Bond Portfolios

Article Abstract:

Recently the application of the mean-variance theory to default-size bonds showed only short bonds to be efficient. The twenty year period under study was marked by a strong upward rate movement. Unanticipated rate movements are of trouble to this research. Figures are included.

Study and teaching, Bonds, Bonds (Securities)

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