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V3 R20 S3.3 "Increasing Allocations to Fixed Income in Corporate Pension Plans"

A Holistic Approach to Asset Location

Finally, some have argued that an asset allocation of 100% fixed-income securities can be justified on the premise that the company is acting as an agent for the benefit of all stakeholders, including shareholders and plan participants. This argument centers on tax-efficient asset location. A taxable investor—the shareholder and plan participant—should prefer to take his long-term equity risk in that portion of his overall portfolio where he will receive the benefit of lower capital gains rates rather than in tax-deferred accounts, the proceeds of which will be taxed at income tax rates. Consider a small business owner with US$3 million in total assets. The assets are split between a pension fund of which he is the sole participant (US$1 million) and a taxable portfolio (US$2 million). Assume that the asset allocation that represents his preferred level of risk is 67% equities and 33% fixed income. Where should this individual hold his equity exposure? As discussed, the more favorable tax treatment of equity returns argues for holding the equity exposure in his taxable account, while the investments subject to the higher tax rate should be held in the tax-deferred account—the pension plan. Theoretically, this tax efficiency argument can be extended to pension funds operated by publicly traded companies.14

The above passage talks about comparing a publicly traded company’s decision to allocate 100% of pension assets to the FI category to an individual’s decision on asset location based on tax status. However, I’m failing to see the parallel. I understand that an individual has a choice on up to 3 accounts (TA / TDA /TEA)  into which to divy up his asset classes. But how does a publicly traded corp have the same two options? What is the parallel to a “taxable” account in which a publicly traded company would hold tax advantaged securities for the benefit of its stakeholders? 

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It is saying (in a long winded way), the pension can be viewed & invested as 100% fixed income because it is a  TDA. The individual can then allocate equities to their TA.

You got it right already:

>>> I understand that an individual has a choice on up to 3 accounts (TA / TDA /TEA)  into which to divy up his asset classes.