And then comes the nightmare of Unfunded Pension Liability that follows the company AND its owners FOREVER.
“And then comes the nightmare of Unfunded Pension Liability that follows the company AND its owners FOREVER.”
In the United States the entire concept of a defined benefit pension disappeared around 2010. At the time pension plans were implemented by most American companies they were a necessity for worker competition. But government kept expanding what pensions would cover and how they’d be funded, and companies were forced to give up the concept or begin working solely to fund the pension program. Also, a huge pension fund became a liability as Bernie Schwartz used those funds to get loans to buy the company and then used the pension fund to pay off the loans. (Screwing the employees.)
We know today why Studebaker folded their automotive operation because someone got ahold of the secret minutes of the meeting where the board discussed it. There was a coming wave of retirements and Studebaker would have to start paying pensions at a rate they couldn’t maintain. It wasn’t that they weren’t making money selling cars. It’s that they weren’t making enough money selling to pay off the pension requirement and make a profit.
Another problem with pensions, as demonstrated by the California public pension fund, is that the money goes into the fund at now dollar value, but inflation and raises (from which future payouts are calculated) went up faster than any profit from investing the money in the fund. Fund investments were supposed to be conservative and aimed at preserving the funds. There was no way to keep up with inflation and grow the fund to keep it even without taking huge risks. Throw on top of that many “investments” made were political rather than financial. Those invariably lost money.