Originally Posted by
JustInFacts
Just so you understand what is being discussed at Fedex regarding the pension, in the failed TA, there were several options. Someone already on property could elect to stay in the pension and receive the increased benefit, or you could opt for a lower benefit and transition to a MBCBP freezing your years of vesting for the pension, or you could opt out of the current pension entirely and get a credit for the pension applied to the MBCBP. All new hires would only get the new MBCBP. So we are not talking about a total termination of the pension.
I understand that. I am pointing out that the costing of DB plans, whether you are going to keep them, terminate them or do something in-between is way more complex than most people think, and a lot of the times the math is completely outside the control of the plan sponsor.
NotMrNiceGuy has a really good grasp on it. But not to belabor the point, all things being equal, Companies would much rather pay less than more. Over the vast, stable sea that was the US economy from the post WWII era to about 1990, DBs were the way to go because they cost virtually nothing in real terms, and even with minor contributions, it was still way cheaper than stroking a check for an extra 16-18% every other week, which is real money.
Since the 1990s, "free money" has become en vogue, so you have this rapid oscillation in the financial markets. Your "fully funded" plan can swing wildly in the other direction should 0.2% interest become a thing again and it's not a leap to think that the plan sponsor would be on the hook for a 9 figure check, payable immediately. I'm sure they'd like to avoid that, if possible.