I have longed believed that the NPV of underfunded/unfunded but promised benefits to workers from their employers like pensions and health care should appear as a liability line on the corporate balance sheet with a claim that comes in before bondholders.
That simple accounting changing will have quite effect on the way these things are handled. I think most companies would switch to fund as you go along retirement accounts. As public policy, USAGOV should facilitate this by expanding the IRA by allowing unlimited contribution directly by employers in lie of a traditional pension. I have no time for details in this comment though.
It also means, that in the case the company goes under, workers/retirees will have have a claim before bondholders, so taxpayers are less likely to be on the hook.
Posted on November 2, 2008 by purpleslog