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Spiral Wizard | When news reports mention the Chrysler has $17 Billion in pension obligations, what exactly does that mean? |
Is that $17 Billion they need right now to pay all the obligations? Or is that $17 Billion the total over the next 40 or so years? Or is that the amount they need in their control to earn enough interest, appreciation and dividends to pay the obligation for the foreseeable future?
Additional Details
Is that $17 Billion they need right now to pay all the obligations? Or is that $17 Billion the total over the next 40 or so years? Or is that the amount they need in their control to earn enough interest, appreciation and dividends to pay the obligation for the foreseeable future?
(updated)
Looking at the answers so far, my follow up question is - If the $17 billion is the estimated need to pay out over the next 40 or so years and they currently have a "nest egg" large enough to cover it or a pledge from certain companies to pay into it, then why doesn't Chrysler "sell off" the funds to be managed for growth and income and then try to redo the union contract so that the health benefits and retirement plans are more like they are in otehr companies? That way all the people promised pensions receive them and current or new employees are adjusted to a new more modern plan. |
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nh2sma
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that is how much they owe in total to all the people who have retired from the company for the rest of their estimated lifespans. |
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toledojeeper
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That 17 billion also includes the health care benefits not just the pension.Also what they don't say is the pension fund is overfunded by 2 billion dollars.Also the money in the fund is earning intrest so it actually lowers thier pension obligation. |
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bob_callahan
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Pension obligations are usually calculated as the present value of future benefits. In other words, they estimate the total of all the benefits they'll ever have to pay out, and then calculate the amount of cash they would have to invest now to be able to pay those benefits as they come due. If you take the present value of future benefits, and subtract the current value of assets, you get the unfunded pension liability. This is the number we worry about. The Pension Protection Act of 2006 has requirements for closing this gap. |
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struckjeffrey
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Hi there,
Based on what you shared,it is there obligation to employees who retired and are either collecting or trying to start collecting their earned pensions for their years with Chrysler.
Jeff |
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Angie
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That is $17 billion that is owed to current employees when they retire, current retirees (and their survivors) from now until all of those people are deceased. |
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levindis
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Obligation usually refers to an estimation of how much money is required to cover the existing pensioneers until they pass away. Generally this is determined by estimating an average life expectancy and an average payout per pensioneer per year. This is then applied to all employees who are eligible to take part in the pension program. This is forcated until the last penioneer dies since it is viewed as debt obligation. |
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