The hard thing is that the retired autoworkers and car company white collar employees have done nothing wrong. Long service to the company was rewarded with a good pension-- part of the reason to be in that industry.Pension experts predict that a government takeover of the two giant plans would spur other auto companies and all types of manufacturers to abandon such benefits for competitive reasons.
For hundreds of thousands of retired auto workers, a federal pension takeover would mean sharply reduced benefits. For the federal agency that insures pensions, it would mean a logistical nightmare in the short term — and most likely a slow demise eventually as fewer and fewer small plans remain in the system and pay premiums.
But they failed to forecast the deterioration of the US domestic car manufacturer.
If recent events teach us anything, it is the problem of systemic risk. One part of the system (Lehman Brothers) fails, and the repercussions ripple across the whole financial system.
The systemic effect could well be the end of DB pensions, except for certain executive schemes which are part and parcel of hiring C-Xlevel executives and senior managers.
Ironically, as an after-effect of the 2000-02 stock market crash, GM's pension fund is apparently highly weighted in bonds, and so has performed relatively well.
But if the plan sponsor goes, that is not enough to protect you. The actuarial assumption is ongoing contributions to offset accumulated liabilities.