Description: Private profits and socialized losses. That’s how columnist Jen Gerson refers to the collapse of pension benefits for former Sears employees and the Ontario government’s response of a Pension Benefits Guarantee Fund. The Fund means the taxpayer steps in to guarantee a minimum level of pension benefits for underfunded pensions. Meanwhile, during better times, Sears executives received bonuses and shareholders collected dividends while Sears underfunded employee pension funds. As Gerson says, maybe it’s time for a law that forbids such payouts unless pensions are fully funded.
Date: January 14, 2018
1) Have you or anyone one you know been caught in the pension problems at Sears? How would you deal with such an impact on your personal finances if this did happen to you?
2) What do you think about the possibility of a law that forbid executive bonuses or dividend payments to shareholders if pension funds were not fully funded?
3) Wiley’s Financial Accounting: Tools for Business Decision-Making describes how you would write-off an account from a company that could not pay its debts, such as a bankrupt company. How would you record this write-off in the general journal?