Now You See Them…
The problem with pension plans? Your clients may not be able to count on their promised benefits when they retire. How to determine if your clients' DB plan sponsor is on the verge.
Bankruptcy carries its own costs, of course, and they're not insignificant. Shareholders are wiped out. Customers may flee. So might key employees. Creditors will set tougher terms for any future loans or purchase of raw material, and they might even demand that management be replaced. So companies do not take this step lightly.
But bankruptcy has simply gotten a lot cheaper, easier, and more socially acceptable than it used to be. Former U.S. Comptroller General David Walker views the rush to bankruptcy and pension-dumping as part of a larger decline in society's moral values. “Before, there was a taint to going into bankruptcy. When you see that employers have been able to terminate their [pension] plans and have to pay only cents on the dollar, and with the realization that the taint associated with declaring bankruptcy is gone — well,” he concluded sadly, “it's not surprising that more people would be considering this as a viable restructuring option.”
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