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Post-Bankruptcy Pension Cost: Potential Jobs Killer
05/15/2009
John Penn
This economic downturn includes a problem that we have seen before — an ever-growing number of underfunded pension plans. But one big difference this time is that additional fees imposed in 2006 can prevent a company from reorganizing and thereby hasten the day it closes its doors.
Just as it was from 2002 to 2003, pension shortfalls arose from the combination of the stock market and an overall interest rate drop at the same time. That combination of events can create deficiency in a previously fully funded plan almost overnight. Most of a pension plan’s liabilities are for payments to be made well into the future. To evaluate the adequacy of a plan’s funding, those obligations are discounted to a “present value.”
This column appeared in Law360.com. To view the full text, please click on the link below.