Another pension plan bites the dust

2013

One of these days nobody except public employees will have a traditional defined benefit pension. You see, here is what’s really important “volatility that pension obligations have historically had on our earnings and cash flow.” It’s all about the next quarters earnings no matter that over time interest rates change and the stock market goes up and down thus allowing pension funding to be viable. What matters more is accounting.

Interestingly, the same volatility of pension obligations affects individuals struggling to fund retirement through a 401(k) plan; interest rates, the stock market and cash flow. As a society we are making a big mistake killing off pensions. The consequences will be felt in the decades ahead in large part through growing demands for more social programs.

“Over the past decade, these four ground-breaking contracts have enabled us to reduce high-cost capacity, establish a VEBA (Voluntary Employees’ Beneficiary Association) to eliminate legacy retiree medical benefit obligations, create a tiered wage structure, improve productivity and now, cap our legacy pension obligations,” he said.

The turnaround of the company’s North American operations couldn’t have taken place without all of these changes, Kramer said.

“This new contract provides the opportunity to take away the volatility that pension obligations have historically had on our earnings and cash flow, enhancing our long-term competitiveness and supporting our goal to be profitable through the economic cycle,” he said.

The new contract gives Goodyear the ability to freeze its DB plans and replace them with a DC plan at any time during the four-year contract once full funding is achieved.

Goodyear’s executives estimated the company’s pension plan would have $1.1 billion in unfunded liabilities at the end of 2013.

via Goodyear will freeze pension once it's fully funded | BenefitsPro.