Tim Buhl, newly appointed controller of STL, is considering ways to reduce his company's expenditures on annual

Question:

Tim Buhl, newly appointed controller of STL, is considering ways to reduce his company's expenditures on annual pension costs. One way to do this is to switch STL's pension fund assets from First Security to NET Life. STL is a very well-respected computer manufacturer that recently has experienced a sharp decline in its financial performance for the first time in its 25-year history. Despite financial problems, STL still is committed to providing its employees with good pension and postretirement health benefits
Under its present plan with First Security, STL is obligated to pay £43 million to meet the expected value of future pension benefits that are payable to employees as an upon their retirement from the company. On the other hand, NET Life requires STL to pay only £35 million for identical future pension benefits. First Security is one of the oldest and most reputable insurance companies in Europe. NET Life has a much weaker reputation in the insurance industry. In pondering the significant difference in annual pension costs, Buhl asks himself, "Is this too good to be true?"
Instructions
Answer the following questions
a. Why might NET Life's pension cost requirement be £8 million less than First Security's requirement for the same future value?
b. What ethical issues should Tim Buhl consider before switching STL's pension fund assets?
c. Who are the that could be affected by Buhl decision?
Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,... Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...