There is a basic concept that when someone works for somebody, they get paid. If part of the pay is eligible for retirement benefits, then that becomes an immediate obligation of the payer. Even though the payments to the employee will not be made until after his retirement, expenses incurred – and funding for that payment originates – at the time it is earned.
Retirement plans are of two types: defined contribution and defined benefit. Both have the same goal; the difference is in the mechanics. Examples of a defined contribution plan are 401Ks and profit sharing. With these, you put the money aside and the money will grow and be there later. Defined benefit plans include Social Security, most state and local pensions, and union plans like GM. These are plans in which people get retirement from some formula related to their salary. But whether it is a defined contribution or defined benefit plan, in both cases, the obligation to pay those benefits originates at the time it is earned by the employee and it must be funded at that time. In the world of business, lack of appropriate funding of those promises of retirement benefits can land someone in jail.
What would you think about someone who promised to put retirement funds aside and didn’t? They would be crooks. And not only that, when they issued their financial reports, they hid the fact that they were obligated to make all of these payments in the future.
We need to hold these legislators that continue to perpetrate this fraud accountable.