Defined Benefit Pension Trusts: Asset Partitioning and the Residual Interest

34 Pages Posted: 2 Dec 2008 Last revised: 29 Nov 2010

See all articles by David Fox

David Fox

School of Law, University of Edinburgh

Date Written: December 2, 2008

Abstract

Over the past decade many employers have closed their defined benefit pension schemes to new members. This paper considers the legal background to these changes by applying an organisational analysis to the distinctive features of a defined benefit pension trust. It proposes that asset partitioning in such a trust serves an entirely different purpose from that in a traditional donative trust. It also proposes that the residual interest in a pension trust is allocated differently from in a donative trust: the party with the most direct residual interest in the trust is the employer rather than the beneficiary of the scheme. This organisational analysis goes far to explain why recent economic events have made the future for defined benefit pension schemes so uncertain.

Keywords: Trusts, pensions, ERISA, organisational theory, asset partitioning, residual claimant status

JEL Classification: K11, K20, K22

Suggested Citation

Fox, David, Defined Benefit Pension Trusts: Asset Partitioning and the Residual Interest (December 2, 2008). University of Cambridge Faculty of Law Research Paper No. 10/03, Available at SSRN: https://ssrn.com/abstract=1310116 or http://dx.doi.org/10.2139/ssrn.1310116

David Fox (Contact Author)

School of Law, University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, EH8 9YL
United Kingdom

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