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Politics : View from the Center and Left

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To: Dale Baker who wrote (468)	6/7/2005 3:11:27 AM
From: Peter Dierks	Read Replies (1) of 541477

The scam just pulled by United is an abuse of the pension guarantee system. Most private pensions are required under FASB rules to be funded up to the known amount of the liability. The target is to be fully funded. Current rules can be abused,, and were abused during the bubble. The economy was booming, so investments in the pension fund boomed, and contributions required were minimal. The bottom line soared due to the low pension contributions made by publicly traded companies to their defined benefits plans. This fueled the bubble more. Then, someone pricked the bubble. (If Social Security were subject to the same rules, it would be declared bankrupt.) Actually, the pensions are generally relatively immune from bankruptcy if I understand correctly. The pension fund is not an asset of the company per se. After 9/11, special rules were passed by Congress to give companies time to get back to fully funded. Many pensions today are still not compliant with accounting standards of solvency. If companies had prudently kept contributing as if there was no bubble, the "crisis" might have been much smaller.

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