Did I read the 2014 annual report correctly and they had $20+ billion in profit? I think they can afford to keep the pension plan the way it is.
A much better system is a defined contribution, in which the employer makes a contribution to a retirement fund for the employee. The employee then has sole proprietorship of the funds, regardless what happens to the company.
Gold-backed current sucks. When new gold is discovered it's value swings wildly. When no gold is being discovered but the economy is going great there is a shortage of it so deflation sets in, causing loans to balloon in real terms.
I agree, but the government has so many rules around this I wonder if pensions at one point were a better value and a way to work around these arcane rules. For example, the max an employer can add to a 401k is 35k. Another is if a family clears 200k, then you're not allowed to put money into an Roth IRA without huge penalties. Never mind that $5500 is already not very much to save for retirement, but we definitely cannot let everyone do the right thing and save money.
Tax-advantaged savings accounts are to reward savers who might not otherwise save. They don't mean that everyone deserves tax-free saving.
However I don't care where you live, if you are earning $200K in a household you can afford to save.
Well, this is where the distortion comes in. The employer uses pre-tax money when funding pensions. The employee doesn't have the ability to do this. It's the same situation with other benefits.
So it's optimal to take a lower salary and more benefits. But this is strictly worse than if the taxation regime was the same for both employees and employers.
We need to recognize that we live under a regime in which bankers have the entire populous by the throat. To live a decent life by American standards, nearly everyone has to take out loans for every major purchase and ends up paying 2-3x the nominal cost in interest. Let the massive scale of this sink in for a moment and you'll get some concept of just how powerful, all-consuming, and critical the banks are in this country.
Savings is anathema to this loan-based society that's been concocted. If someone has substantial savings, they may not need a loan, and that's very bad for the powers that be (because they won't get 2-3x the cost of the item over some years). Keynesian economics has been taken to its logical conclusion of sub-zero interest rates and practically everyone is indentured to their lienholders and employers. "The Road to Serfdom" indeed.
From an actuarial standpoint, a defined benefit plan isn't any more complicated than just buying perpetuities from any companies or governments stable enough to offer them, until your benefit obligations are met.
The problems arise when current managers use the pensions as a means to game the accounting numbers or as a means to embezzle funds.
But I agree with the problem of pensions but I would also add that today's managers don't want to fund them the way they should. Instead, they set aside some money and assume a very rosy growth rate that doesn't always materialize. Even with that inflated expected growth rate, pensions are often still underfunded. An employee should be free to contribute to such a perpetuity if he so chooses.
Underfunded pension liabilities will likely take down several large cities over the coming years.
No, they won't. As usual, the federal government will step in as the insurer of last resort, just as they do with the pension guarantee corp [1].
It's almost like HN gets off on people's retirement compensation being cut. Don't blame the people who were promised benefits, blame the politicians who did so, and the apathetic voters who allowed it. If your returns forecasts were wrong because of lack of growth, guess what, you get to make up the difference. That's how business works.
Defined contribution is not "a much better system" for employees. It just moves risk from the company onto them. IIRC, there's not actually much "employer credit risk" to employees because pensions have to participate in a mandatory government insurance program.
In the uk you have to account for pension liabilities as if tomorrow 100% of your scheme members became liabilities which is only likely to happen if there is a zombie Apocalypse.
One has to ask who benefits from this dodgy change to acounting rules.
If I make $1B in profit off of $2B in sales, I'm much better off than $1B in profit off of $1T in sales.
Otherwise: agreed that these things are rarely reduceable to a single scalar (amount of profit).
According to economists, over the "long term", profits tend to 0%. Wireline technologies are quite old, it seems the long term is here.
Also, a business like that is going to have a metric crap-ton of noncash items, plus interest and taxes. So looking at free cash flow or ebitda are pretty enlightening in such cases.
Finally, there are comps so looking at this in isolation tells us nothing about idiosyncratic (management) performance rather than industry conditions.
My point is that a drive-by financial analysis of the net income margin of VZ is not at all instructive, and can't be used one way or another to justify/attack the propriety of labor grievances.
Those that are not (which the wireline business should be in, given its very high barrier to entry and low number of competitors) do not go to zero in the long run because of the market power they control and tacit collusion with other players in the market. The 'razor thin margin' likely exists not because of competition, but because of inefficiency in the way the business is run.