“Pension Shortfalls at Troubled U.S. Firms Double“: Reuters reports. According to the article, pension underfunding at “troubled” U.S. companies has doubled this fiscal year and could exceed $80 billion, with airlines accounting for nearly a third of the shortfall. This from PBGC Executive Director Steven Kandarian who is calling for reforms to pension rules, telling the House Education and the Workforce Committee today that the cost of current pension problems would otherwise have to be met through reduced benefits, higher premium payments by companies to the agency or a taxpayer bailout. House Education and Workforce Committee Chairman John Boehner, R-Ohio, said that it appears that the PBGC “has enough resources to make benefit payments for the near future.” But Boehner also is reported to have said, “There is a serious question of whether a taxpayer bailout of the PBGC would be necessary if the financial condition of the agency continues to deteriorate.”
Others reporting on the PBGC’s prepared testimony before the House Education and the Workforce Committee today:
The Seattle Times : “Deficit hits $5.7B at federal pension co.”
The Kansas City Star: “Troubled federal pension’s deficit soars.”
On a related subject, FT.com has this interesting article via Yahoo! News: “UBS tells pension funds to avoid equities.” According to the article, “[p]ension funds should consider not investing in equities at all” based on a controversial report from highly rated analysts at UBS, the investment bank. The advice apparently contradicts the conventional wisdom followed by most US and UK pension funds over the past 40 years. The article makes this point:
The analysts argue that pension liabilities are simply another form of corporate borrowings, in this case borrowings from employees to pay shareholders. If a company were to borrow money in the bond market and use the proceeds to buy a basket of equities, the effect would be the same, although more tax-efficient. Even if investing in equities brings in higher cash flows than would come from bonds, “the resulting increase in risk negates this benefit and does not actually increase the value of the company”, they conclude.
“Top-paid US CEOs are at firms with most worker layoffs, pension woes: survey:” AFP via Yahoo! News reports. The article states that, based upon a report by the Institute for Policy Studies and United for a Fair Economy, the “typical chief executive of a major US company earned 3.7 million dollars last year, with the largest paychecks going to those whose firms had the most worker layoffs, under-funded pensions and tax breaks.”
Regarding planning for retirement and health care, the Motley Fool via Yahoo! News had this article yesterday: “Health Care: Retirement’s Fourth Leg.“