It was no small matter for the ILM Group's executives when they froze the pension plan that has provided retirement security for the firm's employees since 1947.
The financial pressure of maintaining the plan had been mounting on the small insurer for years. But until March, ILM had not given in, even as tens of thousands of other employers did. It held on when the Sept. 11, 2001, terrorist attacks rocked the economy, flat-lining the stocks that fund the pension payments. It also kept the plan intact when the Great Recession shrank its holdings by 29 percent.
What finally did the plan in? Rock-bottom interest rates. The very rates, in fact, that helped fuel a stock market rally and brought ILM double-digit returns on its pension-fund investments in each of the past three years. But because of an accounting twist, the near-zero rates also caused ILM's projected pension obligations — like those of every other private company that still provides a traditional pension — to spike, overwhelming the stock market gains.
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