What is the benefit to a firm for DC over DB plans? To the employee? What are balance sheet implications for the shift to DC from DB plans?
How would you decide, if you were CFO, how to allocate the tax savings among competing interests, such as shareholders, workers (and their pension plans), and others?
How many factors that affect the DB pension funded ratio can you identify? What industries, do you think, have higher funded ratios? Why might that be the case?
If you were an equity research analyst, how would disaggregating pension cost (expense) benefit your analysis? Specifically, how does isolating service cost in operating income and disaggregating the other components (interest, expected return, amortizations) make your analysis better/easier?
So, DuPont is increasing a DB pension contribution because of an anticipated decrease in corporate tax rates. What are some other considerations for firms as they decide how much to fund their pension plans?
Can you follow the arithmetic supporting the claim that borrowing to fund pension plan assets can boost EPS more than borrowing to buy back stocks? What is your opinion about this financial strategy?
Public pensions are underfunded by an estimated $1.75 trillion. Can you identify the various causes, as well as possible solutions? Will there be “winners” and “losers”? Can you name them?
If you were an employee at a firm with a DB pension plan, would you be worried!? Why is the funded status so low? What could/should firms do to fully fund their plans?
What would you do, as a CFO, to try to offset the increase in the underfunded status of your DB pension plan caused by declining interest rates?
Can you describe why the average DB plan is only 78% funded as of 2/16, whereas it was 95% funded at the end of 2013?
If you were the CFO of Monsanto, what options do you have to try to counter market volatility and its effects on the pension funded status? Which would you choose? Why?
What are the reasons Newell Rubbermaid wants to buyout pensioners (from their defined benefit plans)? Does this move by Rubbermaid provide information about Rubbermaid’s future? How do you think the stock market reacted to this story?
If you were CFO of a firm with a DB pension plan, why would you switch to mark-to-market pension accounting from the deferred-recognition/smoothing model? What is the benefit? What are the costs?
Is there concern that pensioners at Sears will not receive pension payments in amounts they had anticipated? What are the various combinations of options that Sears has to fund the underfunded portion of the pension obligation?
How would you write a new pension standard that accommodates a hybrid, “risk sharing” pension plan, one that incorporates elements of both DB and DC plans?
What are the various causes of underfunded pensions? If you were CFO of a company with a DB plan, what factors would you consider in deciding whether to transfer your pension to an insurance company such as Prudential? Should taxpayers be responsible for the PBGC?
If you were asked on a job interview, could you explain the relation between interest rates and the funding status of defined benefit pension plans? Could you explain who are the winners and who are the losers (and why) by changing the interest rate to a 25 year average rate from a 2 year average rate?
If you were the CFO of a publicly traded firm, would you want a DB pension plan or a DC? If you were an employee, which would you prefer? How will the increased longevity wind its way through to the financial statements? That is, what accounts are affected, and how?
