We have a pension funding problem. The Pension Benefit Guaranty Corporation is today exceedingly vulnerable. Too many of the proposals to reduce this vulnerability, protect plan participants, and encourage plan sponsors to stay in the game amount to special pleadings for some stakeholders, typically at the expense of others. Some other proposals promise a free lunch fueled by risky investments, deferrals of cost, and optimistic expectations. Pension plans can become and remain fully funded at all times after a suitable, although not necessarily rapid, transition. One way to introduce transparency and objectivity is through securitization, creating capital market-based transition securities that mimic the current relationships between defined-benefit pension plans and their corporate sponsors and the PBGC.
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