Pension Benefit Guaranty Corporation

At 3% inflation, it loses roughly a quarter of its purchasing power in 15 years.

Your pension has a counterparty, and if it's not the federal government, you should know what the PBGC caps actually are.

And you cannot sell a pension, so all your liquidity has to come from the other side of the balance sheet.

But the core point stands, count everything before you decide what you need more of.

A federal pension is backed by the United States government.

A pension from a mid-sized manufacturer is backed by a mid-sized manufacturer and the Pension Benefit Guarantee Corporation behind it, and the PBGC has coverage caps that can land well below what your statement says you're owed.

Most people have never checked that.

You should check that.

What I would like to see is if these are pension funds, guess who's going to bail them out? And right now, we're paying for the infrastructure.

The Pension Benefit Guarantee Corporation, isn't it?

That's right.

So we're paying for the roads and all of the increases and for all these buildings to be built.

Does managing the lump sum ar- uh, uh, amount make you slightly uncomfortable or nervous? If you answer yes to that, then again, may be better to have this monthly amount that is coming from someone else.

And then four, would the full monthly payment be protected from the PBGC if the company tried to p- or that is paying you has financial trouble? And if you answer yes to all four of those, then I think you're decidedly leaning towards the monthly amount for life versus just the lump sum.

One other caveat.

The vast majority of these monthly amounts do not come with COLAs.

Is there an ownership interest going up the chain from the original employers to each subsequent owner? And there's no dispute here.

The test under the PBGC rules is 80% ownership.

It's complicated, but basically 80% ownership.

And I'm going to read from that, the PBGC rules, in about two seconds here.

But there's no dispute that the general partner only owned approximately 0.03% of the limited partner.

Therefore, the general partner and the limited partner are not in a common control relationship.

But it's to be clear, there is a path to deal with your concerns about the unfairness of all this.

There is a path to deal with those concerns, but that's just separate from the statutes.

Does managing the lump sum amount make you slightly uncomfortable or nervous? If you answer yes to that, then again, may be better to have this monthly amount that is coming from someone else.

And then four, would the full monthly payment be protected from the PBGC if the company trying to p- or that is paying you has financial trouble? And if you can answer, if you answer yes to all four of those, then I think you're decidedly leaning towards the monthly amount for life versus just the lump sum.

One other caveat.

The vast majority of these monthly amounts do not come with COLAs.

There's federal backstops.

There's the PBGC, Pension Benefit Guarantee Corporation.

That is a federal backstop that every company issues a pension, has to pay into it.

It's basically like insurance premiums, if you will.

The government's like, we need a backstop in case IBM in this case goes bust.

We can't have all these pensioners, just their pensions disappearing and then being bust in retirement.

So PBGC steps in and helps backstop that.

They in effect take over pension obligations from IBM, again, in this case, I'm not picking on them, and will continue to pay the pensioners.