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Recent articles related to the financial crisis.
Wednesday, March 25, 2009
Pensions In Peril
by Dollars and Sense
Those with their retirements in 401(k) plans have taken a huge hit. Those with defined pension plans aren't free of the carnage.
From the
Boston Globe:
Under a law that took effect last year, underfunded pension plans may be forced to limit lump-sum payments and suspend cost-of-living increases for retirees. In addition, some plans could be frozen, preventing current employees from earning credit for additional years on the job.
"Companies are going to have to make drastic decisions about their pension plans," said Peter Austin, executive director of BNY Mellon Pension Services, which advises businesses on retirement plans.
Pension funds are typically invested in a mix of stocks, bonds, and other securities, most of which have fallen sharply. By some estimates, thousands of pension plans could be affected by the law because their funds have become so depleted. Watson Wyatt Worldwide, a consulting firm, estimated pension assets declined 26 percent in 2008. The firm also reported the 100 largest US pensions were just 79 percent funded in 2008, compared with 109 percent funded at the end of 2007. That means they have 79 cents set aside for every dollar owed to current and future retirees.
About one-third of employees nationwide participate in a traditional or defined benefit pension plan, according to the Employee Benefit Research Institute, a Washington nonprofit.
The law has already started affecting some local employers. For instance, Boston book publisher Houghton-Mifflin Harcourt Publishing Co., notified its 5,000 employees last week that effective April 1 they no longer have the option of receiving a lump-sum payout at retirement. Now, they can only receive half the money, with the rest paid in traditional monthly payments.
"We had no choice," said Houghton-Mifflin spokesman Josef Blumenfeld. "The law doesn't leave us with any latitude."
Full article
here.
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3/25/2009 02:44:00 PM