So how far out are pension plans usually funded?

[DebJ]

The 75 years for the Post Office sounds ridiculous no matter what, but does anyone know what is 'normal' or 'high-end' funding? On MSNBC tonight one of the commentators said WalMart wasn't funded out that far. So, how far out are they funded? I tried the Google but couldn't find anything.

Cross-posted from GD and Economy in hopes one of our DU Braniacs can help me out!

[TreasonousBastard]

1. No easy answer...

This is from an IRS page on the Pension Protection Act, and makes as little sense to you as is does to me:

"For large pension plans, one part of the minimum funding requirement is based upon the difference between the plan's current liability and the value of the plan's assets. The current liability is a measure of the value of the benefits earned to date and is generally calculated using an interest rate based upon the interest rates on 30-year Treasury securities as specified by the Commissioner.<1> The contribution based upon this difference is called the deficit reduction contribution (because it makes up the deficit between the current liability and the value of the plan's assets). The deficit reduction contribution (DRC) resulted in relatively large increases in contributions for employers with large underfunded plans, many of whom had no funding requirements for the prior few years."

The original Pension Protection Act came about because in a recession some industries were broke and could barely make payroll, much less throw money into a pension hole. Kinda like the Post Office now, but it doesn't apply to the PO.

I admit I haven't kept up since the last time I was in a pension plan, but the trick is that in an old-fashioned defined benefit pension (the kind that says something like "We'll pay you 50% of your salary when you retire") you have to have the money salted away in a pension fund. Requirements change, but the idea is to prove to the IRS, pension guarantee fund, and anyone else who cares that you can pay when the money is due.

To prove that, you make certain assumptions on staff turnover and calculate what you will be paying from year to year on the basis of how many employees you have. Then you make assumptions on what the returns will be on the fund and how much you have to sock away. Then you chisel as much as you can and put the bare minimum in. If you look closely, you'll find that everyone has underfunded pensions to some extent, with the federal gummint probably the worst of the lot. At any rate, nobody looks 75 years in the future.

However, much, if not most of the private sector has gone over to defined contribution pensions, though-- glorified 401Ks where each year you work they throw some money in a pot and when you retire you get whatever's left in there. No way that can be underfunded.

[SheilaT]

2. If I recall correctly, ERISA came about because

companies were suddenly being required to have adequate funding in the pension plans. I can recall very clearly that any number of major companies stopped offering pensions. I believe that it may have happened at just about exactly the same time that 401k plans came about.

[Omaha Steve]

5. On average enough to pay all benefit claims for the next 30 years

Less than that is considered a sign of trouble by actuaries.

[Historic NY]

3. NY States pension fund has almost 141 billion .........

The lions' share of benefits— 84 percent—paid by the Fund comes from our investment earnings.

http://www.osc.state.ny.us/press/releases/feb11/022211a.htm

[madrchsod]

4. the us postal service is a private corporation

the postal service receives 0 tax payer money.

remember the republicans forced a private corporation to assume debt that no other corporation in the usa carries.