Trending Content - Private Equity Forum
| +89 | Nothing to do at work & bored to hell | 9 | 2d |
| +67 | Do people over-index on 'moats' | 22 | 2d |
| +54 | Predicted Net Worth in Trodden Finance Path by 60? | 20 | 2d |
| +44 | Biggest (avoidable) failures in PE Investments? | 25 | 2d |
| +24 | What do you think of PE Value Creation Careers in 2026? | 7 | 1d |
| +19 | LT Career Path after MF PE Associate Program? | 5 | 17h |
| +17 | Is the lifestyle really better? | 13 | 3h |
| +16 | Honest opinions needed about lateraling | 5 | 1d |
| +12 | NY LMM PE Recruiting | 3 | 3d |
| +12 | How to approach Buyside Recruiting | 3 | 6d |
Career Resources
This is why everyone hates wall street
edit: wtf how did i get so many bananas
Edit since my words were so shrilly and hyperbolically taken out of context.
Can you - maybe, see my more serious comments below. My personal opinion is that as a capitalist it is my obligation to pay taxes, not provide health care, a funded retirement, or any other social programs. I believe these are government responsibilities and I am happy to fund them through taxes, but I don't believe those obligations should be on my shoulders as a private employer. and, therefore, I prefer to avoid them when possible.
Jesus Christ... You're arguing that you shouldn't provide what you're contractually obligated to provide to your employees, per their employment contracts, because you personally don't believe in funded retirement?
I'm sure you'd also be fine if your employer arbitrarily decided not to pay you a salary for a few years if your boss didn't believe in motivating employees through monetary reward?
I came to this thread hoping to learn something about accounting and/or transaction dynamics. My hopes were abruptly destroyed.
you're not out of the woods, yet.
https://www.washingtonpost.com/business/economy/as-a-grocery-chain-is-d…
full disclosure, this is way outside my wheelhouse
one thing I do know about pensions is once it reaches 110% funded status you can offload the liability to an insurance company. so perhaps you could redirect portions of retained earnings to the pension until it reaches that funded status and then annuitize it with an insurance company.
alternatively, you could offer buyouts to some employees (many will take them) this lowering the overall liability
finally, and this is a wild ass idea, you could give the pension some LP ownership of some of your firm's other funds, get good returns, it gets overfunded, and then you offload it.
Sure you can. Most commonly, the company can offer a lump sum payment to individuals within the plan to buy them out based on their defined benefit. Alternatively, the company can purchase an annuity contract from an insurance company. The insurance company taking over a company plan must honor the rules of the plan document, so any features and options available to a participant must remain the same. This is often done to address an underfunded pension position, and becoming increasing popular as administrative costs rise and pension liabilities become more transparent.
The liability comes off the balance sheet in both cases.
Not directly on point, but IMO, the concept of defined benefit plans is ludicrous. Unless the plan could meet its obligations by investing 100% in US Treasuries (which it can't), it is magical thinking to "guarantee" benefits. No investment that is so low risk as to be virtually risk-free is going to generate enough return to cover pension liabilities. Should the people that expected to receive them be screwed over just for the sake of maximizing corporate profits? Of course not. But if it truly cannot be funded (e.g. Chicago teacher's pension fund) I do not think the government should step in with taxpayer money and bail it out, or jack up taxes to cover it. Be a fucking adult - life happens. If you're dumb enough to think that someone can 100% guarantee a defined payout to you 30+ years into the future and you have no fall back plan, that is on you.
Let the monkeyshit commence.
You're all over the map.
You're right that there's no such thing as a 100% guarantee in life, but the notion that you need to be invested 100% risk-free to meet pension obligations is... not correct, or wise, or the issue.
Generally, pensions aren't underfunded today because of poor performance of risk assets. They're underfunded because plan sponsors haven't made the necessary cash contributions to keep the assets in line with the liabilities. Every year these sponsors get a report from their actuaries that say "You should make a contribution of $X million dollars today and plan to make contributions of $Y million dollars going forward to stay healthy." And plan sponsors say "Ok cool report. We'll contribute $0 today because we can't afford it, but maybe we'll do better next year."
The concept of a DB isn't ludicrous - it's actually pretty ingenious. As a system it largely worked for a couple of generations. But now its impractical in our modern political climate where we can't elect anyone who will do anything but kick the can down the road. Is that the fault of the Chicago Teachers? Certainly not entirely. The taxpayers should have elected more responsible officials who didn't cow to their demands, and who actually contributed the necessary tax dollars. There's plenty of blame to go around, and one way or another taxpayers will have to shoulder some of the burden.
Yes and no. You're conflating an individuals decision at managing his/her individual retirement with a compensation package that was offered to an employee. For the sake of analyzing a current pension we must set aside whether or not pensions are fair or unfair, smart or dumb, as the decision to have one is made.
When an employee joined the firm, the contract had a pension stipulation that was part of the overall compensation package. Everyone knew this - the company and the employee. Its up management to decide how to fund its expenses and in many situations companies, not the employees, chose to underfund. Basically, pensions are delayed compensation and its managements missteps (yes also falling rates...but this didn't happen over night) not poor individual choice that led to this predicament. All along the way the company could have funded its obligations and maybe dropped margins by a point or two but choose not to likely as a mean of increasing stock price, more cash for dividends, etc. To shift blame to the employees is simply wrong.
No one demanded something that wasn't ascertainable with an arbitrary number as you put it, and would be the case of an individual not contributing enough to an IRA/401k. The company did the math, conscientiously chose to underfund, and now the employees are caught holding the bag.