Pension execs connect pension problems to hiring


While many companies can use the huge increase in market returns to mask a looming pension crisis, the problem is still acute. Because of actuarial accounting, pension funding problems are pro-cyclical.  Companies look flush with cash during upswings to the point where the pensions can actually goose earnings.  During downswings, this process works in reverse.

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When the next serious market downturn hits, the underfunded pension liabilities will crush earnings and contribute to a negative feedback loop which takes the market lower.  But, a group of pension executives are not waiting until then.  These companies have sent a letter to the President outlining the connection between unexpectedly large increases in defined benefit obligations (due in large part to healthcare costs) and a lack of hiring. When pension obligations reduce earnings, this slows employment.

Is this something to worry about now?  I believe it is.  When the next market downturn hits it will be much too late. The letter is embedded below (hat tip Brett).

Multi Industry Pension Funding President

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