Deals and People January 13, 2009

Aon Names Benefits Practice Leader for the Americas

January 13, 2009 (PLANSPONSOR.com) - Aon Consulting Worldwide announced that Francois Choquette will join the Global Benefits practice as senior vice president and leader of the Americas team, which covers the United States, Canada and Latin America.
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Choquette will be responsible for continuing to build the global benefits service offerings, brand, and talent in the Americas, according to the announcement. He will join the firm on January 20, 2009, and will be based in San Francisco.

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Choquette has worked for Mercer for 20 years, developing expertise in a broad range of international human resources areas including mergers and acquisitions, global compensation and benefit design, global actuarial, global governance policies, multinational pooling, and employee mobility. Most recently, he led Mercer’s International Retirement Specialty Group for the Americas and its West Coast International Group.

“As organizations look for ways to control costs in their new or expanding global operations, Francois’ leadership and expertise in international consulting will help provide clients with the best solutions to meet their needs,” said Piyush Chaudhari, Aon Consulting’s Global Benefits practice leader, in the announcement.

Administration January 12, 2009

Outgoing Pension Insurer Director Cautions about Carmaker Shortfalls

January 12, 2009 (PLANSPONSOR.com) - The outgoing director of the nation's private-sector pension insurer has warned in a media interview that while the three big automakers' pension programs are OK for now, they are still extremely worrisome.
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Charles E.F. Millard of the Pension Benefit Guaranty Corp. cautioned in the interview that the automaker pensions currently face a collective $41 billion pension shortfall, but still meet government funding requirements, according to a Detroit News report.

In total, the Big Three pensions cover nearly 1.3 million people. If all three automakers were to collapse and turn their plans over to the pension corporation, the agency estimates it would pay out $13 billion of the $41 billion. A $13-billion payout would more than double the agency’s $11 billion deficit.

“It is certainly possible that none of these companies ever files for bankruptcy,” Millard said, according to the News. “It is certainly possible that they all do.” He said the risk to the agency “is significantly greater than it was six or seven months ago.”

Millard added: “We’re not trying to tell people that the pension house is on fire. The point is that in many ways this has a similar look to other situations, such as a Bethlehem Steel.”

The pension corporation assumed the pensions of 95,000 people at Bethlehem Steel in 2002, when the company filed for bankruptcy, and ended up having to pick up $3.7 billion in pension costs (see  PBGC Reports Record Loss ). That plan was underfunded by $4.2 billion.

Understanding the Problem

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According to the news report, Millard said policymakers have to have “a clear understanding of the magnitude of the numbers and the risks” of having three large pension programs being in a comparatively precarious position.

The news report said as of November 30, the pension plans for hourly and salaried workers at General Motors Corp. had a combined deficit of $20 billion, and Ford Motor Co. had an $11.7 billion deficit. Chrysler LLC had a $9.3 billion deficit as of January 1.

The three automakers reported $130.5 billion in pension assets, which represents only 76% of their combined liabilities. GM’s pension is 20% underfunded, Chrysler’s is 34% underfunded, and Ford is short by 27%.

Those figures alone aren’t cause for alarm, Millard said. “If GM were a healthy company with positive cash flow, able to meet all of its obligations and future funding obligations,” then the underfunded status wouldn’t be a significant issue, he said.

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