Trading pension claims would serve many purposes. Beneficiaries would be able to
diversify the idiosyncratic credit risk of their plan sponsors. And systematic
risk could be reallocated to comply with individual risk–return
preferences. The result would be an alignment of companies’ and pension
fund managers’ incentives to keep fund plans fully funded—in line
with beneficiary interests—which would lower agency costs and costs of
government bailouts of defined-benefit plans and would improve the general
welfare. As an accurate valuation of pension liabilities, trading would provide
a measurable yardstick for plan managers.