Central States Pension Case Study

9. How did the pension plan changes affect Harnischfeger’s financial statements in 1984? Are these changes likely to affect future profits?

The group project, Macmillan and Grunski Consulting, consists of two sections. The first part explains the case about discounted cash flow analysis, by answering the given nine questions. The second part discusses the retirement planning.

The Chicago Fire Department and The Chicago Police Department are in danger of losing their pensions. These brave men and women put their lives on the line every day and this is how the government repays them. This is not securing their future of retirement. Citizens believe that our first responder’s pensions should be a high priority to Chicago’s to-do list. This City of Chicago owes these brave men and women a pension like they promised and if that means cutting funds to other things, then it should be done. The pension secures the men and women’s future of retirement, and by taking it away from them it may create unstable lives.

The City of Houston pension systems are at a crossroads. The recession has brought pension funding practices into the bureaucratic limelight due to the proliferating scrutiny and tightening of the local finances. Pension reform has been spurred by ballooning cost projections and an estimate $2.7 trillion nationwide funding gap (Johnson, Chingos & Whitehurst, 2013). Reforming the insufficient pension system has suggested for most citizens from taxpayers who want to reduce the expense down and yet still receive a great quality of firefighters, police officer, and public services who want to preserve their retirement security. The recent Detroit bankruptcy ruling has left a sobering precedent that pension promises are not sacrosanct, but could possibly renege on if a local government falls too far behind its funding obligations (Bomey 2013). The wide ranges of public sector pensions are considering benefit plans. In these kind of plan, when an employee reaches a specified age or years of service, he or she in entitled to a set amount of benefits each year from retirement until decease. The benefit amount of a retiree

For an extended period, state and local policymakers and labor unions ignored as the growing public pension obligations became an increasingly fiscal burden. The pension problem was enormous and associated with irresponsible financial practices connected to defined benefit pension plans (Thompson, 1980). Following this, the state of California and its local government have a problem of unfunded public pension liabilities that was estimated to be around $583 billion. Because of this, as Lu and Otto (2003) claim, several cities in the state have had a difficult duty of balancing budgets in a balanced way to the public employees and taxpayers, while continuing to provide public services to the

As you may know there are two types of pension plans that are most commonly used: a defined contribution plan and a defined benefit plan. “A defined contribution plan sets forth a certain amount that the employer is to contribute to the plan each period (Schroeder, Clark, & Cathey, "Pensions and Other Postretirement Benefits," 2011). “A defined benefit plan specifies the amount of pension benefits to be paid out to plan recipients in the future. Companies that use this plan must make sufficient contributions to the funding agency in order to meet benefit requirements

The first retirement plan created in the United States, is one that the majority of us are familiar, the Social Security Act, signed under law in 1935. Up until 1939, Social Security only paid retirement benefits to primary workers, which for the most part were men. Age 65 was chosen as the retirement age because individuals who survived past childhood were likely to live past 65. However, not everyone benefited from such assistance, even after age 65—agricultural and domestic workers were excluded from coverage (DeWitt, 2010). The excluded group consisted of roughly half of workers contributing to the economy, which the majority were African Americans. According to Larry DeWitt, a public historian from the Social Security Administration, exclusion of such groups was due to tax-collection procedures and not due to racial bias. Although it may seem as though Social Security was meant to be the only form of retirement plan for qualified retirees, it was not. During such time, many individuals strongly depended on their savings as well as on their family.

The population of Kelsey has enlarged foremost to an amplified obligation of police officials by the civil civilization due to progress of criminals because of the rise in population. Due to pecuniary alterations, the town of Kelsey shall be receiving limited assets leading to financial inadequacy. Thus, to poise this debt, the town’s Chief of Police Association is pushing the city to a 15% social security charge for a provisional 3-year time nonetheless the town lawmakers are hesitant for wheedling the tax contributors to give extra levy in the state of financial slump. The mayor understands that the added levy or increase in the funds is not going to happen and has informed the Chief of Police and

Note 11, pages 216-217, describes a number of changes in Harnischfeger’s pension plans in 1984. Describe these changes as clearly as you can. What are the economic consequences of these changes to Harnischfeger and its workers?

On August 17, 2006 the Pension Protection Act of 2006 (the Act) was signed into law. The Pension Protection Act ("PPA") [P.L. 109-280] originated as a single-employer defined benefit pension funding reform bill to strengthen the DB pension system. However, it is best known for the number of provisions to enhance 401(k) and 403(k) plans, especially the auto enrollment feature. Among other noteworthy provisions are those intended to remove legal obstacles to, and create new incentives for, automatic enrollment 401(k) and 403(b) plans. It represents one of the most comprehensive pension reform legislation since ERISA was enacted in 1974. The Act has lead to many companies changing the way their plans are designed and administered, amend plan documents, increase plan funding, and make additional plan disclosures in regulatory filings and to plan participants. The Act made many sweeping changes but for the sake of brevity, only the automatic enrollment plan made by employers on the behalf of its employees is addressed in this report as to the rationale behind the passage of the PPA. Even though the provisions generally apply both to 401(k) and 403(b) plans, for explanatory purposes all references will refer only to 401(k) plans.

For an extended period, state and local policymakers and labor unions ignored the growing public pension obligations as they became an increasing fiscal burden. The pension problem was enormous and associated with irresponsible financial practices connected to defined benefit pension plans (Thompson, 1980, 118). Following this, the state of California and its local governments have a problem of underfunded and unfunded public pension liabilities that was estimated to be around $583 billion (Nava & Christensen, 2015, 1). Despite the fact that the implementation of PEPRA was significant, its impact will be minimal over an extended period, and it has many weaknesses that include failure to address the currently underfunded pension liability

For pensions and post-retirement accounting methods to recognize the benefit costs, estimates and assumptions on future events ascertaining the timing and amount of benefits payments must be sought first. This paper seeks to compare and contrast the early historical accounting for pensions and post-retirement healthcare and life insurance benefits with the rules and guidance applied today in addition to the changes to such guidance and rules that would improve the accounting and reporting of such benefits depending on the business and political changes and as such, predict the effect of such changes on financial reporting and accounting practices.

9. How did the pension plan changes affect Harnischfeger’s financial statements in 1984? Are these changes likely to affect future profits?

The poverty rate amongst the elders in Korea’s especially aging population is very high, it has been a very high contributor to income inequality over the past few decades . As of OECD reports in 2011 have indicated 49 percent of the population above the age of 65 lived in relative poverty. The figure in Korea is extremely high compared to the OECD average which is 13 percent. The BOAP was introduced relatively late in 2008 which covers roughly about 70 percent of the population with the benefit of 97 thousand KRW which is 16 percent of the minimum cost of living in 2014. Although there is a relative generosity in covering a large number of population for the welfare program, the BOAP has not been able to prevent a significant rise of elderly poverty rate and the GINI coefficient since 2007 .

The group project, Macmillan and Grunski Consulting, consists of two sections. The first part explains the case about discounted cash flow analysis, by answering the given nine questions. The second part discusses the retirement planning.