Analysis of Low-Interest Rates Force Companies to Pour Cash into Pensions - Article Example

 The hook in this article is intended to introduce its main focus which is the fact that U.S. corporations are pouring money into pension plans that have been hit by interest rates which are at a record low.

According to Monga and Ramsey (1), this drain on corporate cash comes as a result of the country’s monetary policy which has reduced interest rates to record-low levels with the aim of stimulating the economy by encouraging borrowing. the article also does observe that low-interest rates can be beneficial to companies in the sense that they can borrow money cheaply. The article revisits the issue of pension plans which were used to compensate workers instead of using pay increments. While these plans were quite helpful, they currently seem unsustainable as companies that contribute to pensions struggle with costs.

The authors crunch some numbers, noting that pension plan funding experienced a fall of $79 billion in 2012. Using examples of big companies, the authors are able to show the effect of falling interest rates on pension plans.