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UPS Retirement Topics
May 10th Announcement .Pension
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<blockquote data-quote="SeniorGeek" data-source="post: 195188" data-attributes="member: 4823"><p>For money? I am just guessing, but in the 1980s a lot of pension plans were liquidated to raid their surplus, until tax laws changed to discourage raiding overfunded pension funds. "But thanks to an accounting rule that is little known...there is a way to gain from the pension surplus. The rule provides that if investment returns on pension assets exceed the pension plans' current costs, a company can report the excess as a credit on its income statement. Voila: higher earnings."</p><p> </p><p>The advantage of an overfunded plan can become an even larger advantage if liabilities can be decreased - by reducing benefits. Companies have found ERISA-compliant methods of converting to cash-balance plans "...which can reduce benefits for older employees who otherwise would have seen their pension credits build up rapidly in their last working years", even though ERISA is intended to prevent this sort of benefit reduction.</p><p> </p><p>There <em>is</em> a way for companies to liquidate a pension plan and avoid most of the taxes and keep most of the excess funds, but this is usually a last-ditch effort to keep a company alive...</p><p><a href="http://cyber.law.harvard.edu/rfi/press/termination.htm" target="_blank">http://cyber.law.harvard.edu/rfi/press/termination.htm</a></p><p> </p><p>Another scheme involves merging an overfunded plan with an underfunded plan, to eliminate the penalties that come with an underfunded plan. </p><p> </p><p>Keeping an overfunded plan can make good business sense. Merging has become more common, as companies try to avoid make-up payments on an underfunded plan.</p><p> </p><p>In the end, it will be a business decision - nothing personal.</p></blockquote><p></p>
[QUOTE="SeniorGeek, post: 195188, member: 4823"] For money? I am just guessing, but in the 1980s a lot of pension plans were liquidated to raid their surplus, until tax laws changed to discourage raiding overfunded pension funds. "But thanks to an accounting rule that is little known...there is a way to gain from the pension surplus. The rule provides that if investment returns on pension assets exceed the pension plans' current costs, a company can report the excess as a credit on its income statement. Voila: higher earnings." The advantage of an overfunded plan can become an even larger advantage if liabilities can be decreased - by reducing benefits. Companies have found ERISA-compliant methods of converting to cash-balance plans "...which can reduce benefits for older employees who otherwise would have seen their pension credits build up rapidly in their last working years", even though ERISA is intended to prevent this sort of benefit reduction. There [I]is[/I] a way for companies to liquidate a pension plan and avoid most of the taxes and keep most of the excess funds, but this is usually a last-ditch effort to keep a company alive... [URL]http://cyber.law.harvard.edu/rfi/press/termination.htm[/URL] Another scheme involves merging an overfunded plan with an underfunded plan, to eliminate the penalties that come with an underfunded plan. Keeping an overfunded plan can make good business sense. Merging has become more common, as companies try to avoid make-up payments on an underfunded plan. In the end, it will be a business decision - nothing personal. [/QUOTE]
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