Lauren Silva Laughlin
speaker
62 appearances
2 recordings
1 series
first heard Jun 2019
last heard Jul 2019
Lauren Silva Laughlin’s voice in public audio — every appearance, attributed to the second.
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Appearances
WSJ Your Money Briefing · Corporate Pensions Could Suffer From Lower Interest Rates · 17 Jul 2019
podcast
As interest rates fall, the companies have to recalculate the money that they owe their pensioners.
And little tweaks in the interest rate can actually make a big difference.
So
If a company is expecting the interest rate to be 4% or 5%, that's a lot different than what their liabilities look like if it's 2% or 3%, say.
So as the interest rate has fallen, the liabilities that these companies, or they carry on their balance sheets, has grown.
And that's really bad news for some of them.
That's right.
So last year, they had until the late fall,
to essentially give money into their pension funds and have it be tax deductible at a higher rate.
So a lot of them rushed to put money in then, as any individual would say who is contributing to their own pension, tax deductible at a lower rate, you're going to put in less money.
And that's what they've done this year.
So really, it's been sort of a double whammy for pension funds.
They have falling interest rates, which is increasing their liabilities.
They're putting less money in, which is decreasing their assets.
And this has caused an imbalance.
Absolutely.
So it varies pretty widely among companies, but what ends up happening is they have certain benefits.
funding obligations.
And once they decide they have to pay into their pension funds, then that can be ultimately become an earnings hit.
Yes.
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