Sunday, March 21, 2010

Annual Assessment of Pension Trust Funds' Solvency

Given our experience with the underfunded Nortel Pension Trust Fund it is clear that the laws in place today are inadequate to ensure companies meet their obligations when it comes to defined benefit pensions, and disability payments.

I think that the laws in the USA, Canada, the UK and other progressive countries should be changed to make sure that companies check the status of their trust funds every year and take the necessary steps to ensure that they are properly funded.

In fact I would even go further and suggest that companies report on the status of pension trust funds and disability trust funds each quarter using change analyses on a quarter by quarter basis. Then they should carry out a fully fledged assessment at the end of the year and include it in their annual report.

Surely stockholders, bondholders, banks, and employees would welcome such information. Given the large impact on a company's ability to survive, any outstanding payments to trust funds should be made public just as assets, debts, and revenue are made clear each quarter.

If Nortel had been required to do this in 2007 and 2008 our situation in Canada would be much improved and the PBGC in the US, and the PPF in the UK would not be looking for as much from Nortel's assets.

It would also mean that companies would have to be extremely careful in making pension and other benefit promises. They need to be held accountable and today's weak laws let them get away with reneging on their obligations.

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