Pension Plans In Danger

The deepening recession is taking a toll on not only the single-employer pension plans in this country but also the multi-employer pension plans. Multi-employer pension plans pool together the assets of many companies to minimize the risk to the employees of failed companies. If one corporation failed the others would be able to support the employees that are left behind. The problem now is that too many corporations are failing and the ones that remain are left covering the others. This is causing huge cuts to the profits of these companies and causing strains on the companies ability to make payroll. Thanks to the 2006 Pension Protection Act that is now taking affect, corporations must make sure their pension plan have enough money to cover present and future obligations and have only a short amount of time to cover the shortfalls. They have been cutting jobs to do so. The country might actually have to come in and bail out the failing pension programs through the Pension Benefit Guaranty Corporation which is having its own shortfalls.

To protect themselves, pensions need to invest in less risky assets. Bonds have been helping healthy pensions stay current on their obligations. Even GM's pension is one of the healthiest in the industry because only 26% of their assets are in stocks. Even though it may seem like a bottom and most money managers would hate to sell at this point, it would make the most sense to do so and preserve and work with what they have now. Consistent volatility are proving stocks to be untrustworthy and will be for many more years as long as the Government and a very small number of Superbanks control the country's financial system.

http://www.businessweek.com/magazine/content/08_50/b4112040140636_page_4.htm