Pension funds have become a major concern for American businesses in today’s world of global competition. Corporations and planners failed to understand that pension fund cost would soon overwhelm available funding when baby boomers grew old putting many of the corporations in a cash strapped situation. Executives are responding to these short-falls but not everyone may be happy.
U.S. Airways, Ford, GM, Chrysler, Goodyear Tires, and many more companies are having huge problems with their pension fund allocations. According to a study of U.S. pension fund repositioning by JPMorgan many executives are responding to the problem by increasing fixed-income allocations, managing time-frames better, diversifying risk, enhancing returns and improving the overall funding status (O’Connor, 2006). The study found the following:
Around 22% of public and 17% of private industry pension executives said they expected an increase in hedge fund allocations.
57% of the pension executives state they don’t plan on changing current defined benefit plans but 19% said that they may close or freeze current programs.
17% of pension executives said they may increase their defined pension plan allocations and 11% they don’t have a clue what they are going to do.
For the next 1-3 years it is unlikely that workers will see huge changes in their pension plans and allocation amounts. Yet the survey does highlight that pension executives are beginning to struggle with keeping American retirees funded. In many cases they simply plan on increasing the corporate contribution but this has the indirect result of reducing overall profitability. This reduction in profitability means that expansion, hiring new workers and international competitiveness are reduced. The struggle of the next 10 years is for human resource professionals to come up with better solutions to the aging Americans.
Murad Ali is a two time book author, a ph.d. candidate and a human resource manager. Please visit http://www.thenewbusinessworld.blogspot.com
| | Author Info: Murad Ali is a two-time book author, a human resource management professional, and a Ph.D. candidate. Please visit http://www.thenewbusinessworld.blogspot.com for more articles.
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