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Government's New Regulation That Will Result In Your Getting Screwed on Your Corporate Pension

May 3, 2013

Economic Policy Journal
Robert Wenzel

Never underestimate crony America's methods in teaming up with government to screw the average American.

The latest is a new government regulation that was snuck into a transportation bill, Moving Ahead for Progress in the 21st Century, aka, MAP-21.

Some progress, the bill requires corporations to calculate payments into pensions based on a 25-year average on interest rates, instead of current rates.

In other words, with current low rates, corporations in reality need to make larger contributions to meet pension fund growth goals. But not with government stepping in to help crony corporations. According to new government regulations, corporations now need to calculate pension fund payments based on an interest rate earned on pension assets that can't possibly be earned.

The current rate on the 10-year Treasury is 1.66%. In 1988, 25 years ago the rate was 8.5% plus. Thus, an average over the last 25 years is going to assume an interest rate on assets that doesn't exist. Got that? In calculating contributions, instead of calculating under the actual rate, corporations by law will assume that rates are much higher than they really are by taking an average of the rates over the last 25 years. They are assuming that they are earning much more in their pensions than they really are.


"People getting pension checks this week or next month won't be affected," Greg McBride, chief economist at Bankrate.com, told CNBC "It's the young person of today that has to worry about getting full pension benefits when they retire."

"This proves that pensions are pretty much dead," said McBride. "The change is just another charade to mask the underfunding of pensions and increases the odds of having less money for retirement."

The reduced amount that companies will be putting in has to be figured out by each firm based on the higher rates. CNBC says that Madison Pension Services, a consulting firm, has reported that some minimum pension contributions in 2012 were reduced by 33 percent because of the new regulations..

http://www.economicpolicyjournal.com/2013/05/governments-new-regulation-that-will.html