Pension Plans

Analysis of pension plans was the one of the first things we looked at when we started finEye. It was intriguing to find out how little people knew about the accounting and significance of pension plans. These plans don't show up on the balance sheet and most of the analysts tend to ignore the huge liabilities. Why is it important not to ignore - 44 million, one in five Americans, are covered by company pension plans. It is too big a number to ignore. Financial analysts, policymakers and board members, all have responsibility (at different levels) to make sure that they understand the implications.

I found some interesting things about United's pension plans. The most interesting was the fund management fees - $25 million per year. Investments made were risky - Junk bonds, Dot coms and a energy venture in Albania and the return (probably negative) did not help in reducing the gap between obligations and assets. Please notice the gap between obligatios and fund assets in the picture and you can judge for yourself if this level of management fees was justified. I always hoped that FASB would make it mandatory for companies to disclose the asset allocation to keep management honest. It is impossible to get the current list of pension investments. In the case of United, the file with DOL is 2 years old.

Here is what a United spokesperson had to say. "We have outperformed other similar large plans. United has always operated our plans in the best interests of our participants and beneficiaries, and believe our advisers act similarly." Standard spiel, no truth whatsover.