Defined-Benefit Pensions Should be Outlawed
No institution, including city and state governments, should be permitted to grant a new defined-benefit pension. A defined benefit plan is a plan in which the benefit on retirement is determined by a set formula, rather than depending on investment returns. We do not have Nostradamus's ability to prognosticate and we can't know if today's iconic companies will be mere shells when those pensions come due 30 years hence. Do we need to be reminded of those great icons of the Airline industry like TWA, Pan Am and Eastern to understand how empty those pension promises can become?
Yesterday it was the Airline industry today it is the Automotive industry. GM's pension system had a $20 billion shortfall as of Nov. 30, 2008, based on numbers the company provided the… Continue reading | 25 Comments