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Why is it legal for corporations to discharge defined pension plans yet continue to stay in business?
Wiki User
∙ 15y ago
Because your congressmen wrote the law that way.
I'm not sure your question is fully developed or correct in it's supposition: Cos may end a defined benefit plan by freezing it at the vested amount it is. Like any other portion of your pay package, it too is subject to prospective change.
They cannot eliminate the vested and already earned portion of any qualified plan. Even in bankruptcy (or discontinuation of a business), those plans continue albeit they may be turned over to the PBGC. (Pension Benefit Guarantee Corp...a quasi governmental agency). In those cases, one of the first claims settled is the amount the PBGC needs (under complex actuary calculations) to get to fund the future benefits. (It is true that the PBGC has some guidelines that may limit how much can be paid to something like 7K a month...so an exceptionally rich plan may be limited to paying highly paid people a smaller amount).
Non qualified plans are basically creditors promised a payment like anyone else.
Wiki User
∙ 15y ago
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