A Dog or a Reindeer: Does it Matter?
After taping an interview about pension issues for CNN Money, with about an hour before my next meeting, I walked the streets of New York. A great city at any time, Manhattan seems especially pretty around the holidays. So here I was, walking down 34th Street, about to enter Macy's for a bit of holiday shopping, and lo and behold, I see a bunch of tourists snapping photos. No less curious than the average bear, I walked over to take a peek at what held such appeal. To my surprise, a large dog with reindeer antlers affixed to his head, held the audience in awe. Don't get me wrong. The dog was adorable but I kept wondering why people stopped to watch. Wasn't it clear that this was a regular dog with an obvious holiday add-on? Yet a crowd had stopped long enough to watch, take photos and linger over this canine equivalent of Rudolph.
This furry trompe-l'oeil got me to thinking. If a dog can entertain as a faux reindeer, can a troubled pension plan be seen as financially sound? Are optics more important than reality? Cosmetics (of the financial variety) was in fact one of the topics discussed with anchor Poppy Harlow. In response to her question about possible Congressional relaxation of the Pension Protection Act of 2006 - in order to provide immediate relief to underfunded defined benefit plans - I cautioned that short-term reporting often has little to do with the structural integrity of a plan. We might end up with lovely numbers, due in part to temporary "never minds" when a plan dips below a certain funding status.
Should retirees breathe a sigh of relief when "good" numbers are published and/or the rules are changed to forestall cash contributions or plan freezes when the funding status drops?
Unless you think that a dog is magically transformed into a reindeer by simply adding an antler cap, it is unlikely that a financially solid retirement scheme derives from a modification of Congressional mandates.
Instead, inquiring minds should ask about a plethora of influences such as cash on hand, the plan sponsor's operating cash flow, current asset allocation mix, the ability to identify risks and then act on them before things get out of hand. To repeat one of my favorite mantras, "process is everything" (good process that is). Change the rules of the game and you'll get a reindeer. Look close and you still see a dog. That's not necessarily a bad thing unless the dog bites.
Editor's Notes:
- This adorable photo was originally posted to "A Dog's Best Friend," a blog devoting to placement dogs in good homes. Bravo!
- If you like dogs, check out "It's a Dog's Life - Literally...Puppy Pension Slashed. How is Your Nest Egg?" (June 18, 2008) or "Pensions for Pets?" (November 25, 2006) or "Dogs Get the Blame" (July 31, 2006).
