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Resource ID: #20401
Subject: Pensions
Source: Wall Street Journal (New York)
Affiliation: 
Date: 15-Jun-99

Description

The Wall Street Journal examined how companies have been using their overfunded pension plans to increase profits, rather than pass on the benefits to its workers. "One might think that for employees, the overfunding of [pension] plans would be good news; there would be at least a chance that the company would improve their benefits. But in fact, the incentives for companies are quite different," finds the Journal. Instead, "while no company ever cites profits as a reason for a pension switch, many companies with overfunded pension plans are changing their plans, frequently with the result that future benefits become less generous." The reason for this was rooted in "an accounting rule change" dating back to 1987 that required companies to start recognizing pensions on their income statements as liabilities. But when the unexpected happened, and the stock market boomed -- the result was "the birth of some gargantuan pension-plan surpluses." Greed took over from there.

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