When the Corporate and Public Sector worlds collide, opinion leaders and editorial writers can draw stark contrasts between them. Dan Walters of the Sacramento Bee does just that when looking at defined-benefit pensions.
While many corporations offer hybrid or defined-contribution plans only, some of the country’s most renowned groups still service defined-benefit systems. Those, like General Electric, are government by rules and guidelines set by the Federal Government. One of those requirements is that companies adjust its discount rate on pension investments every few years. That requirement led General Electric to increase its pension fund contribution by $7.4 billion in 2011. Boeing, another company that has a defined-benefit system, had to increase its pension contribution to $2.6 billion in 2012, or $700 million more than it currently pays.
However, Walters opines that similar rules for the publicly run-CalPERS system would be devastating for the state. Should the discount rate be dropped from its current level of 7.75 percent to a private-sector equivalent of 4.2 percent, the resulting unfunded liability would increase by hundreds of billions of dollars.
From the Sacramento Bee:
Major corporations that still maintain traditional defined-benefit pension plans are asking Congress to lower their pension trust fund contributions because, they say, extraordinarily low interest rates force them to sock away too much.
Therein lie two tales.
Read the full article here.