Quote:
Originally Posted by V
I think you need to look at the pension in more than a snapshot in time to determine if it's viable long term. I'm sure the actuaries have done their work. I'm also sure the aging workforce is going to become a greater drain every year. I'm in a DB pension myself, so I hope mine is viable, but I sure wouldn't be surprised if my company made the same policy change in the near future.
One question I have, though, if the DB pension works by those paying in to support those who've retired, how does that work when you eliminate the DB for all new employees?
|
Quote:
Originally Posted by Locke
The old employees' pension would likely have to stand on the growth of its current value of assets, which as pointed out are less than its' projected liabilities.
Basically they'd hope that the fund would achieve enough growth to cover the current deficit while not adding more potential pensioners ie. not allowing the liability to grow.
In truth though they'd just take the shortfall out of General Revenue to cover the difference. Thats the kicker about Government backed DB pensions, the difference will always come from somewhere.
|
This is mostly what happens, but the reality is that pension managers can adequately manage to these liabilities, and that isn't usually the issue. The issue for a lot of companies or entities providing these guarantees is that they don't put the money in to begin with.
The other factor that gets missed from these discussions is that we're not talking about just a pension here forever (which is a bit insane if you really think about it, because companies are paying and receiving say 40 years of work from age 25-65, and paying income for that for roughly 70 years!)
You have to factor in that almost all of these plans, including CP although I haven't looked, includes health and dental coverage for that period as well. That's a big deal. I know on a board like this with demographics that are somewhat younger than say 75 that you might be inclined to think "Whats the big deal?" But from experience I can tell you that the medical/health costs get insane as we age. That's all part of the deal here.