5 ms·

If you can't discharge student loans in bankruptcy, you damn well shouldn't be able to discharge pensions you've promised your employees for decades.

• specialist 7y ago
  Pensions are just deferred compensation, part of the total benefits package (salary, health insurance, etc). They're not entitlements, giveaways, lottery tickets, whatever. Maybe the most insidious side effect of transition to 401k was tricking people without pensions that somehow pensioners are unfairly compensated.
  • KKRCo 7y ago
    Would you be willing to elaborate more on this comment?
  • gimmeThaBeet 7y ago
    I disagree with a lot of that. Defined benefit plans make all the sense in the world sort of empirically or like maybe narratively(?), but the problem is that risk isn't handled equitably. 'Unfair' feels like it has more connotations than my liking, but the main source of that feeling imo is that pensions have frequently made implied rates of return that had little to no chance of realization. It's easy to thumb your nose and say "well that's the company's problem", but what it does illustrate in a more general sense is that counterparty risk is very real, especially in underfunded pensions. While pension plans have a large amount of money saved, the reality of the situation is that part of a pensions mechanics look like a claim on a company's future earnings. That's what grinds my gears about pensions, there's a lot more risk than people think, and it's foolhardy to assume the employer assumes all the risk in theory or practice. The best thing about the transition to 401ks imo was that it made it abundantly clear that there is a large amount of risk in funding retirement. The downside is yes, companies made it clear they were no longer willing to assume any of that risk themselves.
    • specialist 7y ago
      You disagree with honoring commitments? Pensioners should accept the looting or chronic under funding because something something balance sheets?
• asdf21 7y ago
  Humans still exist and live on after bankruptcy.. companies are dissolved.
• gruez 7y ago
  How would this work? If the company goes bankrupt and sold all its assets, who will you take the money from?
  • ilikehurdles 7y ago
    The same people you get your 401k matching money from when a company goes bankrupt and sells its assets. The money assigned to pensions, like the money assigned to 401ks, should not be something the company can ever take money out of or under-fund.
  • hamstercat 7y ago
    The money is supposed to be invested in part by the employee and the employer at the time of payroll. This money is then moved to a fund, impossible to be touched by the company forever and ever. The fund invests the money, it grows, and then you can get an income in retirement after many years. The same could be done by the employee itself by just saving part of his paycheck and investing in a mutual fund, but most people don't have the discipline to do that so a defined-benefit pension protect the employee from itself. That's how it works in other countries like Canada. It's relatively easy and failsafe if well implemented, I really don't understand how it can be legal for a company to access the fund like in the story. It's a shame so many of them are so badly managed/corrupted though. As usual, most stories about pension failing are about gross mismanagement (not paying into the plan as required) or corruption (drawing into the plan innapropriatly).
    • bregma 7y ago
      So, what happened at Nortel?
      • hamstercat 7y ago
        Unfortunately I don't know enough about it to offer an opinion on this specific case. I only know it will pay only part of the promised benefits. But from other pension plans I've seen, this happens because the plan is undercapitalized. This usually happens because of: a) missing employer contribution to the fund on every paycheck b) mismanagement of the fund The second point can be very varied and only limited by imagination, from embezzlement to government action. I've seen laws passed in the past passed about being able to take a loan on certain public pension funds without interest, which shows the complete lack of understanding about how these pensions are supposed to work and the actuarial math behind it.
• refurb 7y ago
  Companies need to pay government insurance on their pension and if they go bankrupt, the insurance pays out a capped amount (~$60K per year) on behalf of the fund.