> Why fund the estimated lifetime costs of health care that will not be provided for maybe 40 or so years into the future? Why not fund a moving window of ten or twenty years of obligations instead?
Because it has incurred those obligations and nothing that happens in the next 10-20 years will make those obligations go away. However, 10-20 years from now, it won't have today's revenue to cover those obligations. In addition, ten years from now it will be incurring additional obligations.
Those obligations have a net present value. If you don't fund them now, you have to fund the remainder later out of future revenues while you're also trying to fund at least part of the obligations that you're incurring then.
Let's assume steady state. If you always fund the net present value of 10-20 years of the obligatations that you incurred in the past and present, you'll eventually end up funding the equivalent of the obligations that you're incurring, but you're behind by the amount that you didn't fund during the ramp. You have to make that up in addition to the equivalent of just funding NPV of what you're incurring.
Do the arithmetic over time - funding the total net present value of future obligations is only sustainable way to handle said obligations.
A pension promise is not like a mortgage - it's just a debt with no collateral; there's no equity to sell if you can't make the payments.
Because it has incurred those obligations and nothing that happens in the next 10-20 years will make those obligations go away. However, 10-20 years from now, it won't have today's revenue to cover those obligations. In addition, ten years from now it will be incurring additional obligations.
Those obligations have a net present value. If you don't fund them now, you have to fund the remainder later out of future revenues while you're also trying to fund at least part of the obligations that you're incurring then.
Let's assume steady state. If you always fund the net present value of 10-20 years of the obligatations that you incurred in the past and present, you'll eventually end up funding the equivalent of the obligations that you're incurring, but you're behind by the amount that you didn't fund during the ramp. You have to make that up in addition to the equivalent of just funding NPV of what you're incurring.
Do the arithmetic over time - funding the total net present value of future obligations is only sustainable way to handle said obligations.
A pension promise is not like a mortgage - it's just a debt with no collateral; there's no equity to sell if you can't make the payments.