The same market meltdown that's trashing your 401(k) is also killing pension funds.
USA Today reports that "The nation's 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008, holding only 79% of the assets needed to cover estimated long-term liabilities. That compares with an $86 billion surplus -- 109% of estimated liabilities -- at the end of 2007."
Another report suggests that pension funds lost another $54 billion in February. The Pension Benefit Guaranty Corp. already has an $11 billion deficit, making the situation all the more precarious.
Corporate America lobbied for pension fund relief as part of the stimulus package but didn't get it. Now American manufacturers will have to pump cash into their pension plans at a time when they barely have enough cash to keep the water cooler stocked with Dixie cups.
Some experts say that the problems effecting pension funds are all the more reason to continue bailing out troubled companies -- if they go into bankruptcy, the pensions become our problem.
But here's the thing: They're already our problem and sending taxpayer money to a company that won't be able to achieve profitability just tacks on an additional cost: If the company can't pay its obligations because it can't earn any money, bailouts won't help that. We're better off holding our noses, taking the pension obligations, and letting the dinosaurs go extinct.
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Reader Comments (Page 1 of 1)
3-12-2009 @ 6:12PM
william lindblad said...
This is just another potential problem lurking in the dark, but before anyone gets too nervous - it's at least a few years away, that is, unless the market goes deep South.
That, is the real immediate problem. Right now there is a small rebound but it has to get back into the 9,000 range before it will remove pressure. I wonder if anyone else noticed the upward movement of gold. This seems to me to be an anomaly, unless those traders expect this rally to be short lived.