So how many years out are pension funds usually funded?

[DebJ]

The 75 years for the Post Office sounds ridiculous no matter what, but does anyone know what is 'normal' or 'high-end' funding? On MSNBC tonight one of the commentators said WalMart wasn't funded out that far. So, how far out are they funded? I tried the Google but couldn't find anything.

[DebJ]

1. Should I cross-post this in the Economy or Labor forums?

Or somewhere else where someone might know?

[roody]

2. Yes.

[SugarShack]

3. yes and add to the postal thread too at this link

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x2020965

[dkf]

4. From the govt...

In recent years there have been many news stories about the financial burden that pension plans have placed upon old-line companies in the automobile, steel, and airline industries. At a time when companies in these industries faced stiff competition from newer companies, the old-line companies needed to make large contributions to their pension plans, as a result of their deterioration in funded status. This article summarizes the events that led to that deterioration and the interim relief that Congress provided with the Pension Funding Equity Act of 2004 (PFEA), then subsequently modified and extended permanently with the Pension Protection Act of 2006.

With the downturn in the stock market in recent years, many pension plans of large companies experienced significant asset losses that led them from the overfunded status that had existed for a large part of the 1990s into underfunded status. Because these plans are subject to the minimum funding requirements of the pension laws, the asset losses must be paid for through increased minimum funding requirements. While almost all pension plans required additional contributions, pension plans of large companies were especially impacted because of the additional funding rules that apply to these plans.

For large pension plans, one part of the minimum funding requirement is based upon the difference between the plan's current liability and the value of the plan's assets. The current liability is a measure of the value of the benefits earned to date and is generally calculated using an interest rate based upon the interest rates on 30-year Treasury securities as specified by the Commissioner.<1> The contribution based upon this difference is called the deficit reduction contribution (because it makes up the deficit between the current liability and the value of the plan's assets). The deficit reduction contribution (DRC) resulted in relatively large increases in contributions for employers with large underfunded plans, many of whom had no funding requirements for the prior few years.

http://www.irs.gov/retirement/article/0,,id=129503,00.html

[DebJ]

5. I would interpret that as meaning that they need to have

enough money to cover all pensions earned as of that year. So they would need enough to cover those who had already retired, plus enough to cover the contributions for those who are currently working and will retire. The latter group would not require quite so much, since 'benefits earned to date' would be relatively minimal or even questionable maybe if they are not yet vested?

Certainly they would not be required to have enough money to cover the full pensions likely to be earned by their 20 year old employees for a 30 year retirement plan; this would not reflect 'benefits earned to date'. And even if they did cover that ridiculous amount, how many years out would that be? If they are 20, work until 65-66-67, that's about 45 years, and then if they live to 95, that would be 75 years out. ON EDIT: So, if a company hires new employee "Jane", then on Day 1 of her hire, they would need to have set aside enough money to cover her retirement. Wow, and I thought health care was an expensive benefit!

Doesn't that totally go against the common sense and basic financial principal about the time value of money? That small investments over time grow over time, not all at once?

Wow. Unbelievable.

I'd like to find a link now to the exact wording of this law and to a listing of those who voted for it. Particularly my Rep in the House. I always love finding a new reason to irritate those answering his phones.

[DebJ]

6. Thanks dkf for the info! n/t