Albert Crenshaw for the Washington Post reports on the pension funding crises: “Pension-Liability Shortfall Said to Rise: Total Could Exceed $80 Billion This Month, Federal Agency Estimates.”
The Wall Street Journal also reports: “Warning of Pension-Plan Shortfall Raises Pressure for Financial Fix.” The article points out that some experts are saying that the PBGC is exaggerating the pension funding crises and that much of the current funding woes are due to temporary factors such as low interest rates and stock-market setbacks that have lowered the value of pension-plan assets. However, the article refers to testimony by Steven Kandarian, executive director for the PBGC, before the House Committee on Education and the Workforce Thursday, which shows that companies’ public disclosures often understate the dimensions of their problems because of lax reporting rules:
As the agency has taken over troubled plans in the steel, airline and retail sectors in the past year, officials have noted that many have turned out to be much more severely underfunded than the companies had publicly reported. Bethlehem Steel, for example, reported its pension fund was 84% funded — a relatively healthy condition. But when the agency took over the plan, it found it was actually 45% funded, with a shortfall totaling $4.3 billion . . .
Another report by the Wall Street Journal—Payrolls Drop by 93,000 Jobs As Unemployment Rate Declines–states that “employers cut jobs for a seventh consecutive month in August” even though the “economy grew at a solid 3.1% annual rate in the second quarter, and forecasters are betting third-quarter growth will be at least 5%.” The article states what I think is the one of the most pressing concerns for our country:
Some economists harbor concerns about long-term structural problems in the economy, such as a flood of U.S. jobs going overseas. “We have simply seen the tip of the iceberg,” said Sung Won Sohn, chief economist at Wells Fargo. “I think it will get worse, not better.” Some reports estimate 5 million jobs — many high-paying — will be lost to other countries by 2015. The economy is growing, but demand is being filled from overseas, Mr. Sohn said.
Another Wall Street Journal article yesterday reports that “A Popular Stock Perk Faces Some Cutbacks.” The article notes that companies are cutting back their employee stock purchase plans. In a typical plan, employees may elect to have a set amount of money deducted from their paychecks which is then used to buy shares of the employer’s stock at a price that is usually somewhere around 15% below the price of the shares at the beginning or end of the offering period, whichever is lower. The article reports that some companies have reduced the discount from 15% to 5% while others have sharply cut the maximum amount that an employee can contribute to the plan. The reason? Anticipation of proposed changes by FASB to expense stock options which you can read about in many previous posts here.