Pension Reform Essay

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

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

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.

The change in the return on investment assumption is for all US plans. The economic consequence is that there will be less injection of cash by these pension owners during the lifetime of their pension. In 1984 the corporation established a new plan, which goal was an improvement in the minimum pension benefit. This constituted in a restructure of the Salaried Employees’ Retirement Plan.

In order to make a more comprehensive analysis of the two cases presented in this report the information is going to dissected into three categories: Policy, Politics and Public Opinion in order to convey a more detailed view of the reform process.

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.

In a recent article from the Wall Street Journal (2013, October 6), Detroit's bankruptcy is forcing the city to look into suspending or changing pension plans for firefighters and other government workers. These unfunded pension plans totaling close to $574 billion are wreaking havoc on budgets. Managers have to be concerned with the budgets of their companies. Additionally, managers are going to have

There’s a lot of discussion in the news about how underfunded many public pensions are around the country. States like Alabama, Michigan, Illinois, and Arizona are in the news for high, pension plan debt that are eating away city and state budgets. But, the public sector isn’t alone in underfunding pensions. Not all private pensions are the money in the bank that employees think they are, in fact they are doing about the same as public pensions. Neither is 100 percent funded. The result?-A combined deficit in retirement plan savings of over $4 trillion for payees between the ages of 25 and 64.

     It is not difficult to understand why Social Security is our country’s most popular government program. Prior to its inception in the 1930’s, more than half the nation’s elderly lived in poverty. The program was designed as a social (old-age) insurance plan which provides a guaranteed income to retired and disabled workers whose loss of wages promises an uncertain economic future. I emphasize the word guaranteed, as this is the issue in contention when considering reform propositions.

Nearly every American sees the letters FICA at least once a week. While rushing out of the office or place of employment and scurrying to the bank to cash a well-deserved paycheck, the average American scowls at the roughly 8% the "FICA tax" inevitably consumes. Yet, ask any American what they plan to use to enjoy life after they retire and the answer is generally uniform: "my social security checks". This answer has been repeated for over sixty-five years. Since President Franklin D. Roosevelt's New Deal, Americans have been receiving returned taxes for their retirement through a public policy known as the Old Age, Survivors, and Disability Insurance (OASDI), or better known as Social Security. Noted as

elderly legal retirement insurance with a mandatory, contribution and welfare, retirement and medical insurance fund has a normal source of channels, self-adjustment and self-adjustment. (see Myers. Pg. 173.) The pension income and support is in accordance with the current pay, balance of payments to determine the principle, according to the population aging forecast, the need for retirement expenses, and constantly adjust the insurance tax rate, through self-adjustment to achieve self-circulation normal operation purpose. (see Findlaw.)

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

In February 2003, EITF reached a consensus on Issue of Accounting for the Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities. Toyota has already begun the separation process. However, no effect of this transaction has been recognized in the consolidated financial statements for the year ended March 31, 2003 as the completion of the transfer of the benefit obligation and related plan assets to the Japanese government is expected in the year ending March 31, 2004.

Turkey is the 18th largest economy body in the world, the 6th largest economy entity in Europe, GDP with $786 billion, GNI per capita with $10, 970, which belong Upper middle income country (World Bank, 2013). Service industry contributed approximately 64.9% for GDP, the industrial sector just over a quarter, agriculture was about 8.2% (CIA, 2014). Moreover, Turkey has a sustainable and steady growth after structural reforms and macroeconomic stabilization since 2001, Turkish economy is becoming diversified and export-oriented due to the large inflow of FDI (ibid). GDP is expected to grow by about 5% over the next five years, single-digit inflation rate will continue to decline (Invest in Turkey, 2014: 24).

Beginning with the strengths and weakness of the EU- Turkey relations, According to Adam (2012), ‘‘The key of Turkey’s success in foreign policy lies in its ability to take full advantage of unique opportunities and deal with specific threats posed by its strategic location at the intersection of Europe, Asia and Africa, and its historic and cultural ties with the Balkans, the Middle East, and the Caucasus’’ (p. 140). To put it another way, Turkey gets political and economic benefits its geographical location. Hence it has acquired opportunistic approach in order to reinforce its position in the global struggle for power. As pointed out by Cengiz Aktar (2012), ‘‘Government of Turkey is proudly and pretentiously becoming a self-declared regional power with no need of the EU