Tuesday, April 26, 2011

My own "main employer" admits to lower levels of funding of defined benefits pensions for retirees

As an indication of the health of defined benefit pension plans still paying out, at least according to inductive reasoning, I note an annual notice of the funding status of my own plan with ING (retired as of Jan. 2002).
It’s a little disturbing. There is a number “Funding Target Attainment Percentage” which appears to be Net Plan Assets to Plan Liabilities. There is some arithmetic with the Funding Standard Carryover Balance. As of January 1, 2009, the ratio had been 94/8% (and improvement from 88.5% as of 1/1/2008, despite the events in late 2008); as of 1/1/2010, it was “just” 80.0%. I don’t know if that’s considered healthy enough or not. There is an essay paragraph that suggests that the royal percentage on Dec. 31, 2010 was 80.9%, little change.

As for the “80%” I remember a joke in a freshman college calculus class. A test had 5 problems.  Miss one, “B-“  (80%).  Miss two, “D-“.

The letter does go over how PBGC works.  It guarantees “basic benefits” earned before any plan is terminated, for (1) benefits at normal retirement age (2 most early retirement benefits, with some maximum reduction in guarantee  (3) annuity for survivors of plan participants and (4) certain disability benefits. 

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