Pension Funds Beg Congress to Suspend Billions in Contributions

So lets see, you minimally fund the pension plan for your workers and make optimistic projections about investing returns. The market goes down, and you are now so far underfunding your pension that the law requires you to add funds to the pension. Your solution, go cry to the politicians. How sad. If Pfizer or IBM are having cash flow problems that is amazing. They really should be able to manage their cash better than that. Their most recent quarterly reports do not indicate cash flow problems. Yes I understand we have a credit crisis so if GM were having problems I wouldn’t be surprised (but you know what – they aren’t, in this area).

I think companies need to meet their obligations. If they choose to minimally fund their pensions without understanding that financial market are volatile, then they will have to pay up as required by law. When times are good you see all these CEOs taking advantage of pension fund “excesses” to reward themselves. They need to learn that you don’t raid your pension funds (either by taking cash out or not funding current investments – because you claim the assets are already sufficient). Pension funds are long term investments and you cannot manage as though the target value is the minimum amount allowed by law (unless you are willing to pay up cash every time your investments don’t meet your predicted returns). This is very simple stuff.

How about this – Big profits, yes, but big oil also has big hole in pension funding

All this while reporting the highest profit ever for a company.

Pension funding problems grow, 2005

Here is a Harvard University document showing Pension gains companies took as income in 1999: GE $1 billion, Bell Atlantic $627 million, IBM $454 million. Thankfully the companies “couldn’t withdraw this surplus without paying a stiff excise tax, enacted in 1990 to put a stop to the pension raids of the 1980s.” But they were still able to claim income on their earnings statement based on pension plan performance.

This whole situation does point out again another reason 401(k) style plans are so popular. Companies can get out of the pension business (which I don’t really see as a sensible business for them to be in anyway). Just provide contributions for your employees retirement plan. Let the employee then worry about the investing.

I am so tired of companies doing the least they possibly can while they are in good times. But of course the success has to result rewarding executives with obscene amounts of money. Then times are tough and they cry that they can’t meet their obligations. How do we let these people keep their jobs? How are they tolerated by the rest of society. They are doing everything they can to prove they are unworthy of any respect.

Related: Avoiding Pension Plan Time Bombs (2003) this stuff is not unexpected, just 5 years ago it was happening. – The Pension Underfunding Crisis: How Effective Have Funding Reforms Been?

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