Fifteen U.S. business groups have asked legislators to provide relief on a pension plan funding law to help companies avoid having to freeze or end pension plans that may be inadequately funded because of the financial crisis.
They want Congress to lower levels at which pension plans must be funded and to clarify whether they could smooth out the market values of pension plan assets over several years in financial reports.
The right answer is no. Markets have fallen by a lot, but they are still not under priced by most historical measures. The idea that the current market drops will soon reverse and bring the pension funds back full funding is a pipe dream. But who has the courage to face the costs of the right answer? The article quotes a letter from the business groups….
At a time when companies need cash to keep their businesses afloat, they are also required to make unexpectedly large contributions to their plans in order to meet funding requirements. Consequently, many companies will have to consider whether to freeze or terminate their pension plans or reduce retirement benefit accruals in order to survive.
I don’t think these companies are just fear mongering to try to get their way. They honestly cannot afford to put away what they need to put away to fund their pensions in the current market. The truth of the matter is that America as a nation has not saved enough for the retirement of the baby boomers. There is no magic cure for this problem.
One thing that is going to be forced on companies is a reduction in the golden parachutes that they hand out to executives. But even if we paid all the executives in American minimums wage, we would hardly make a dent in the hundreds of billions of dollars that pensions funds are lacking.