Although I've said if before, it bears repeating: myriad factors helped bring about the current crisis, and no small number will continue to weigh on our economy -- and our world -- for many years to come.
Contrary to what some might argue, it wasn't just easy money, or high debt loads, or derivatives, or cross-border imbalances that brought us to this point. More broadly, the fact that we failed -- deliberately or otherwise -- to acknowledge the mismatch between our resources and our commitments lies at the root of many of our problems.
Nowhere is that more apparent than in regard to the sorry state of our retirement system, regardless of whether one is referring to the public or private sector. Unfortunately, instead of recognizing reality and making the tough, but necessary adjustments, people keep trying to put off the inevitable or make it somebody else's problem.
That is why, as the following press release, "U.S. Employers Face Huge Pension Funding Tabs Without Relief, Watson Wyatt Analysis Finds," suggests, corporate America is on the hunt for another bailout.
Despite recent increases in asset values and regulatory relief from the Internal Revenue Service (IRS), U.S. employers will be required to contribute $89 billion into their defined benefit (DB) plans in 2010 and more than $146 billion in 2011 unless they receive funding relief from the federal government, according to an analysis by Watson Wyatt, a leading global consulting firm.
"The combination of a deep recession and new pension law has landed employers in extraordinary circumstances, and they need temporary funding relief to lessen the enormous pension contributions required in the next few years," said Mark Warshawsky, director of retirement research at Watson Wyatt, who testified on these points at an October 1 House Ways and Means Committee hearing.
Watson Wyatt analyzed the projected required contributions for single-employer DB plans under various scenarios: the existing law (including the September 25 IRS guidance) and three legislative proposals currently under consideration.
The analysis found that past relief granted by legislation and regulations had lowered required contributions for corporate pension plans to $32 billion in 2009 from $38 billion in 2008. But without further action, employers' contributions would explode to more than $146 billion in 2011. Under the three legislative proposals, employers' contributions would be somewhat lower, by $10 billion to $25 billion annually with different time paths, but required contributions would still be very large.
