The Pension Benefit Guaranty Corporation (PBGC) charges pension plans a portion of their underfunding each year. If there is not enough cash to contribute to the plan, borrowing money is another option. However, plan sponsors should take several things into consideration before borrowing, such as their credit rating, bond covenants, legal considerations, and professional fees. In the end, the decision on whether to borrow or contribute to a plan should be a team effort involving the plan sponsor and its advisors.
This article was published in Plan Sponsor.