The benefits debate – Letters to the Editor – Letter to the Editor
AS AN ACTUARY, I FELT I HAD TO write in regards to the letter from David Wray as well as to address your article “The Party’s Over; Why Plan Like It’s 1999?” both in the November 2002 issue.
I understand Mr. Wray’s defense of 401(k) plans, since that is his role as president of the Profit Sharing/401(k) Council of America. He points out that in 1981 there were 378,318 companies with defined-contribution (DC) plans and 168,015 with defined-benefit (DB) plans. What he fails to mention was the number of participants covered by the plans. There were far more participants covered by the DB plans. Many small professional firms had two DC plans, which accounts for the large number he stated. I think you will find the total assets in the DB plans exceeded the total in the DC plans at that time.
As for the article I mentioned above, we have to blame the government and the Financial Accounting Standards Board for today’s resulting dilemma of DB plans. First, the Internal Revenue Service was overly concerned about the “overfunding” of DB plans. Then, FASB initiated the most ridiculous reporting of DB plans ever to surface. Where was everyone when large companies, not as a result of good management or sales but rather huge assets gains, were reporting profits in their pension plans? Where was everyone when CEOs’ bonuses were the result of pension plan paper profits? Now that the stock market has dropped, we are seeing lots of press regarding the necessity of huge contributions required for DB plans. Had the IRS and FASB left things alone, today’s problems would not exist.
Herbert D. Greff
Herbert David Group
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