US. So Why Are GE’s Pensions So Underfunded, Anyway?
Last week, General Electric announced the impending freeze of its pension plans to new accrual, for salaried workers and executives. And, as much as we’re accustomed to the stories of woefully-underfunded public pensions and multi-employer pensions, it’s worth taking a look at the situation at GE, and asking the question, why were GE’s plans so underfunded that they felt it necessary to take this step?
(And, yes, part of the answer is simply, “everyone’s doing it” and per the statistics in that prior article it is somewhat of a natural next step to freeze pensions to new accrual some years after closing them to new entrants, but there is more to the story.)
In the case of multi-employer pensions, the story is familiar: pension funding levels drop during bear markets, funding legislation requires that they make up the deficits within a given number of years, they apply for hardship exemptions because of the burdens that a requirement to bring the plan up to full funding would produce for participating employers, sooner or later the chickens come home to roost.
Read more @Forbes
