Originally Posted by
kronan
Originally Posted by
TonyC
Originally Posted by
kronan
What levels would "break" a PSPP style Pension. I do recall hearing that our PSPP style pension was stress-tested over various historical eras without breaking.
What has broken Pensions in the past is overly optimistic investment return predictions resulting in no required Pension contributions. FedEx has been very realistic with predicted returns on our Pension Trust and has used leverage to add assets to our Pension Trust even when they haven't been required to do so.
PSPP design has a fixed contribution year by year. I have no idea what percentage that was, when the market imploded last year I posted a model of hypothetical 30% down turns year by year by year. Even with that extreme, still works out because the initial draw from our Pension Trust will be very limited (roughly 120-150 people retire each year)
This might sound odd, but a lot of times after a huge bear market subsequent years have outsized returns as well.
The future could always be different. But in that different future....how does that economic collapse impact on Traditional A plans?
Fixed contribution. That's right.
How does that economic collapse impact on Traditional "A" plans? That's The Company's problem, because they bear ALL of the investment risk.
Oh, and those highly-compensated executives still have a personal vested interest in the the success or failure of the fund since they're in it too.
A couple of links, again, a PSPP style plan is a Defined Benefit Plan. The Benefit Calculation formula isn’t as easy as 2%*YOS*FAE, but it would still exist. And none of the Government protections embedded in law can be negotiated away.
https://www.investopedia.com/terms/d...ensionplan.asp
https://www.investopedia.com/terms/p...nshortfall.asp
Thank you, DR K.
It's a Pension Plan which is a hybrid between a Defined Contribution Plan and a Defined Benefit Plan. It's a mix of risks and rewards, kind of like what we already have with BOTH a Defined Benefit Plan and a Defined Contribution Plan. For us to abandon our "A" Plan in favor of a Variable Benefit Plan would be a stupid move in the wrong direction on the risk and reward spectrum.
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