Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

International Business Machines Corp. (IBM): The Shocking Bill Your Daughter’s Girl-Scout Cookie Money Is Paying

Page 1 of 2

Selling Girl Scout cookies is an annual spring ritual, one that my 8-year-old daughter participated in for the first time this year with her Brownie troop. I was proud of all the hard work and effort that I saw from dozens of local troop members and parents as they worked to raise funds for the activities that define what being a Girl Scout is.

Yet recent revelations about the pension crisis at the national Girl Scouts of the USA organization have me questioning whether the efforts that my daughter and her troop-mates make are truly aimed at furthering their Girl Scout experience. With recent lawsuits between local Girl Scout councils and the national organization, mistakes in the way the GSUSA handled pension benefits have cast a shadow over what should have been untempered enthusiasm in light of the Girl Scouts’ 100th anniversary last year.

Image source: Wikimedia Commons, courtesy Drmies.

What’s behind the pension problem?
The most shocking thing about the pension shortfall at the GSUSA is its size. A $347 million deficit at the national organization has led to major financial demands on the more than 100 local councils that help fund GSUSA. One council in middle Tennessee has sued the national organization, seeking to withdraw from the pension plan by alleging that the national organization breached its fiduciary duty in mismanaging the plan’s finances. Without pulling out of the plan, it and other local councils will have to pay makeup contributions to the plan to cover pension liabilities. That in turn has put financial stress on local councils, leading to controversial moves like selling off summer-camp properties and laying off the locally based employees who help volunteers.

International Business Machines Corp. (NYSE:IBM)

For its part, the national organization blames the economic crisis for its pension troubles. As recently as 2007, the pension plan ran a surplus of about $150 million. In comments to the House Ways and Means Committee (link opens PDF file), GSUSA CEO Anna Maria Chavez argued that the organization’s “unfortunate situation is not anyone’s fault,” citing its decision to freeze its pension plan as having reversed the initially positive effects of recent amendments to pension-funding provisions that were designed to help it and other charities. Chavez now anticipates that the organization will have to contribute $145 million between 2014 and 2016 to help fund the defined-benefit plan for 13,000 participants, further noting that those contribution requirements are more stringent than for-profit corporations face.

The national organization hopes to get at least some relief from the shortfall. If GSUSA can successfully lobby Congress, it could reduce the amount it has to contribute to the plan, giving it more time to remedy the shortfall. Still, any short-term reduction in required contributions would come at the expense of higher costs from 2017 to 2022, according to GSUSA projections.

Get ready for more
There’s nothing all that unusual in the pension problems facing Girl Scouts of the USA. Plenty of private companies and public-sector employers are dealing with the same issues and have had to take similar steps to shore up their pension finances. Like the GSUSA, International Business Machines Corp. (NYSE:IBM) and Verizon Communications Inc. (NYSE:VZ) froze their pension plans several years ago, as both companies decided that reducing the unpredictability of pension benefits made the most sense for them in managing their risk. More recently, Verizon Communications Inc. (NYSE:VZ) and General Motors Company (NYSE:GM) took even more dramatic steps to limit pension risk, outsourcing substantial portions of their respective pension liabilities to insurance giant Prudential Financial Inc (NYSE:PRU). By doing so, the two employers passed off their obligations to an industry that’s designed to handle the longevity risk that pension payments create.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!