The Pankian Metaphor 3058

however, the severity of the problems are significantly different for companies (and their employees) that have fully funded pension plans ... vis-a-vis industries that continued the practice of paying pensions (at least partially) out of existing operating revenues.

the fully funded pension plans have corporations depositing money over the years that the obligation is created (i.e. as part of the person working). companies w-o fully funded pension plans are paying for pensions out of existing operating revenues. This can effectively make current earnings look better and defers the obligation to later time. If the amount of earnings and number of retirees is steady state function over long period of time ... there can be little difference between "fully funded pension plans" and non-fully funded pension plans. However, most industries are seeing a significant increases in number of people in the pension plans (compared to when a lot of these plans were originally created). In such a situation, non-fully funded plans create significantly deffered obligations (making current profit look much better than it actually is ... and moving the problem for others to deal with a couple decades down the road). In the past, the motivation for executives making such decision was to significantly increase their personal bonus ... since there are no corrective forces in most executive bonus plans to take into consideration significant problems that they may have created that don't come to light until decades later. this is analogous to the discussion regarding scope of dynamic adaptive feedback control mechanisms ... if the scope (time period) is to short, the "market" can arrive at extrondinarily non-optimal solutions

anyway, for the heck of it ... a couple random URLs from search engine looking for the phrase "fully funded pension plan"

there is a big difference between making good-bad decisions regarding investment for fully funded pension plan ... and companies that are paying for current pensions out of current operating revenue.

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