What is DuPont doing with the cash that it does not have to use to fund the pension plan assets? If you were the CFO, what would you do if you found yourself with “freed-up” cash? What is the expected effect on pension funded status from the new mortality tables from the Society of Actuaries? What are some other considerations before spending the cash?
AT&T has received approval to put $9.5 billion of its preferred stock into its defined benefit pension plan, in lieu of cash. How does this help AT&T? What would be your reaction if you were a pensioner and had worked at AT&T? What would be your reaction if you were an AT&T stockholder?
Do you think the managers of public pension funds should make investing decisions to further social policies or to maximize returns to the funds? If you were the chief investing manager for a fund, what would guide you in your investing decisions?
Do you support the authors’ argument that a federal insurance policy for pensions for bankrupt cities is a good idea? What is your opinion about the potential hazard of cities unloading their pension burdens should such a backstop become a reality?
Who do you think is responsible for the unfunded pension liabilities in several major municipalities, like Detroit? What would you propose be done about the unfunded liabilities? Do you believe that accounting measurement and recognition standards have played a part in masking the severity of the problem? In bankruptcy, how would you decide which creditors should be paid?
If you were a retiree of Kodak, what would be your reaction to the news that Kodak had settled its pension obligation to you with a transfer of its film business to your pension plan?
So, does this mean, when you retire, you’ll get a bottle of scotch instead of a paycheck? How will the substitution of inventory for cash funding possibly affect the funding status?
$1 trillion has been added to defined benefit pension plan assets since 2009 (for the Russell 3000) yet the underfunded status still worsened over this time. What are the main reasons?
Why are firms having to pour cash into their defined benefit (DB) pension funds? Why are firms switching new employees to defined contribution (DC) pension funds? What are the possible incentive effects on employees if some are under DC plans, whereas others are under DB plans?
If you are a young student or someone just entering the workforce, is retirement income a concern to you? Why or why not? Do you know what kind of pensions (if any) your parents have: defined benefit or defined contribution? If you end up having a pension, do you know what kind it is likely to be? Why? Why do you suppose public sector pensions are more likely to be defined benefit plans?
Name several of the variables that have contributed to the $1 trillion underfunded public pension plans. If you had the power to “dictate” a solution, what would it be?
Maryland’s public pension plan expected returns of 7.75% but realized actual returns of only 0.36% for the most recent fiscal year. What are the consequences of the variance between expected and actual returns? Is this a “one-off” year, or a longer trend? If the latter, what would you propose to do about the situation? What are the consequences of your proposal?
Try to connect the dots: how does using a two year average AA bond rating as the discount rate and requiring full funding of defined benefit pension plans protect the PBGC and hurt corporations? Should the rating window be extended to 25 years? Should the funding requirements be lowered to 80%?
What did South Carolina’s pension fund managers do to increase returns on the pension fund? Compare the politics involved in public pension fund management to private pension fund management.
Municipal unions are fighting the reduction of assumed rate of returns on pension plan assets. Why? Is “using 7 percent in a 3 percent world” equivalent to hiding debt from the balance sheet? What are solutions to the problem?
Do you think the Supreme Court will uphold the healthcare law? If so, how might the law affect corporate decisions with respect to obligations (health care, pensions, etc.) in relation to their employees?
What are some potential consequences of allowing firms to change how they calculate the discount rate for measuring defined benefit pension obligations? Do you think firms should be allowed to use a longer time series for averaging? Why or why not?
Honeywell, IBM, AT&T, Verizon, Reynolds, and now UPS have changed their accounting for pensions. What is a commonality among these firms? What do you think may be driving these firms to change the accounting? And why now?
Pension contributions in 2012 for the S&P 500 will need to be around $90 billion. If you are the CEO of a company without sufficient cash flow to make the funding contribution, what are your options? Which would you choose, and why?
