Mike Rapoport wrote:

It isn't supposed to require either a leap of faith or the company remaining
in business. The Company is suppose to deposit money to fund the pension
plan which is a trust with an independent board. The funds are
professionally managed and, barring catastrophe, there should be enough to
pay the promised benefits.

The problem is that the funds are typically invested in stocks and/or bonds. If
the market is doing well, the employer only has to contribute money for
relatively new employees -- employees who have been there a while already have
substantial funds, and the returns on that provide the necessary increase. If,
however, the market isn't doing well, the company has to make continuing
deposits, usually at a time in which they aren't making very much themselves.

My former employer is typical in this regard. In early 2001, the market was
still cooking, and my former employer had the pension funds in stocks. As the
market collapsed later in the year, there was a rush to shift everything to
bonds. Then came the ENRON scandal. Congress reacted to that by increasing the
amount of equity employers had to keep in their pension plans. That meant that
companies that had pension plans suddenly had to scrape up substantial amounts
of cash to add to them at a time that the market was forcing them to divert more
and more of their income to the plans anyway.

My company reacted in two ways. First, they laid off anyone who was close to
either a 2 year or a 5 year service anniversary (those are the dates that
pensions become partially and fully vested). That freed up a lot of funds that
could be allocated to pensions for other employees. Second, they changed the
pension plan to a "cash balance payout" plan. This works sort of like Bush's
"private account" option for Social Security. The company pays in a certain
amount into your pension. If the market does well during your career, you'll get
a big lump sum when you retire; if not, you'll get a tiny lump sum when you retire.

George Patterson
There's plenty of room for all of God's creatures. Right next to the
mashed potatoes.