Underfunded Defined Benefit Plans: The End Of The Pension Holiday
- Topics:
- Stock Options
- Tags:
- Benefit Plan,
- Benefits,
- DB,
- Human Resources,
- Payroll Solutions
- Source:
- Illinois State Bar Association
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Overview: This article briefly surveys the DB funding requirements, factors that have contributed to the rise of underfunding, additional pressures on DB plans, and some suggestions for employers of public and private companies who are facing funding problems. It tells about funding a defined benefit plan. A defined benefit plan promises the employee a definite level of retirement income based on a formula. Generally, a pension plan is considered fully funded if its assets would cover its liabilities in the event it was suddenly terminated. Of course, it is important to note that a snapshot of a DB plan where liabilities have exceeded assets is a far cry from a chronically underfunded plan that leads to a distress termination and a PBCG bailout (as described below). DB plans have become newly attractive from the perspective of employees with diminished 401(k) plans, because employers bear the burden of funding the benefit notwithstanding market conditions. Indeed, employers will be required to make significantly larger contributions to DB plans than they have in the recent past.
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Format: PDF | Size: 80KB | Date: Dec 2002 | Pages: 2
