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Auto Workers and GM bankruptcy-WyDave
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Redman
Posted 4/1/2009 23:26 (#665667 - in reply to #665504)
Subject: RE: Defined benefit


SW Saskatchewan
Have had a little experience with two of these plans. Maybe the plan managers are evil, but I would be more willing to bet that the simple explanation of stupid explains the situation just as well. (neither one of these plans benefit me but my wife benefits from another one).

Plan A - after several years of a booming stock market and participation in several private equity ventures has a large actuarial surplus. Partly because of stupid regulations they were required to either lessen contributions, increase benefits or pay out the surplus.
Bingo, they paid out the surplus that resulted in cheques of over a quarter of a million $ to participants with 20 years of service. More or less depending on years of service.

Plan B- In the same situation chose to increase benefits.

In both cases the big "surplus" melted like a snowbank in the Kansas sun on a July day and now they can't put the genie back in the bottle. Big increases in contributions by both employer and employee are going to be necessary to re-balance the plan.

It seems that generally accepted accounting principles shouldn't be!

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