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This Road Work Made Possible by Underfunding Pensions
The New York Times; subscription may be required Link to more items from this source
[Opinion]
July 15, 2014
"When rates are low, as they are now, the government tells companies to set aside more money to pay for future pension benefits because they can't count on high returns on safe investments to cover pension costs. Some companies have complained that 'artificially low' interest rates are forcing them to actually overfund their plans. The 2012 highway bill and the new proposal give companies relief on that front, letting them fund their pensions based mostly on a historical 25-year average of interest rates; essentially, they're being allowed to calculate the cost of promising pension benefits on the basis of investments -- safe, high-yielding bonds -- that were once available to pension funds but can't be found today. This is wishful math."

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