Pension plans for many companies are severely underfunded, leaving them at risk of being unable complete scheduled payments, said Milken Institute Senior Managing Director Brad Belt, who spoke with SmartBrief’s Sean McMahon during the Milken Institute Global Conference this month. Belt co-authored a recent research paper, “Protecting Private Pensions and the Public Interest: Solutions for the Shortfalls in Employer-Sponsored Defined-Benefit Plans.” Solutions to the pension problem should focus on helping companies resolve shortfalls in their pension plans and on creating a pension system that is more sustainable for companies.
Belt offers steps to save companies from their pension debt.
- Stratify companies that are in trouble. Companies that need help with their pension plans generally fall into three categories: those that are reasonably healthy and still contribute to the economy, those that are significantly underfunded and need a lot of help before they can fulfill their pension obligations and those that are so deep in pension debt that they might need to be written off.
- Expand the authority of the Pension Benefit Guaranty Corp. The PBGC should be able to negotiate with troubled plan sponsors to help them restructure the terms of their plans or help them immediately pay off debt for less than what they owe.
- Make better use of financial markets. There should be a way to trade pension claims and issue pension-backed bonds. Also, sponsors should be able to purchase assets that can be matched against pension debt.
Watch the rest of the interview.