University at Buffalo - The State University of New York
Skip to Content
Official UB news and information for the media

Rich get richer under new pension law

Release Date: June 14, 2017

Video
Click to play video

Dambra discusses his research.

“While Congress has extended MAP-21 into 2023, firms are using the act to continue to underfund their pension plans and transfer wealth from pension holders to shareholders through stock repurchases.”
University at Buffalo School of Management

BUFFALO, N.Y. — An act passed by Congress in 2012 isn’t stimulating the investment and job creation promised by its proponents, according to new research from the University at Buffalo School of Management.

A study forthcoming in The Accounting Review is the first to examine the consequences of the Moving Ahead for Progress in the 21st Century Act (MAP-21), which reduced the minimum amounts that firms must contribute to their pension plans. 

The study’s author Michael Dambra, assistant professor of accounting and law in the UB School of Management, found that rather than reinvest the funds, the average firm either holds the funds on its balance sheet as liquid assets or pays them out to shareholders.

“Congress, trade groups and pension plan sponsors claimed that pension funding relief would increase investment and facilitate job growth,” says Dambra. “I find little evidence that MAP-21 encouraged such activity. But while Congress has extended MAP-21 into 2023, firms are using the act to continue to underfund their pension plans and transfer wealth from pension holders to shareholders through stock repurchases.”

Dambra analyzed mandatory pension contribution data provided by the U.S. Department of Labor immediately before and after the passage of MAP-21 to examine how firms’ capital budgeting and financing policies were affected. He found no average association between pension funding relief and capital expenditures, research and development, cash acquisitions, working capital or employment in the two years following MAP-21.

“Of the estimated $145 billion in pension funding relief provided by MAP-21, managers spent nearly $40 billion on stock repurchases and retained more than $52 billion on their balance sheets,” says Dambra. 

The UB School of Management is recognized for its emphasis on real-world learning, community and economic impact, and the global perspective of its faculty, students and alumni. The school also has been ranked by Bloomberg Businessweek, Forbes and U.S. News & World Report for the quality of its programs and the return on investment it provides its graduates. For more information about the UB School of Management, visit mgt.buffalo.edu.

Media Contact Information

Contact
Kevin Manne
Assistant Director of Communications
School of Management
716-645-5238
kjmanne@buffalo.edu