S&P 500 pension plan funding to cost $57 billion over next two years

This compares with an estimated cost of $19 billion last year, $4 billion in 2002 and a pensions income of $7 billion in 2001. CSFB analysts said pension costs would continue to rise – despite rising equity markets – due to the “powerful smoothing mechanisms” developed into pension plan accounting.

CSFB, which assumed an 18% return on assets in 2003 and a 50 basis point cut in the discount rate last year, believes 236 companies will experience an increase in pension costs that will reduce their earnings this year. Of these, 27 companies will suffer a loss in earnings by more than 10 cents per share, including Delta Air Lines, Lockheed Martin, Boeing, NCR, Fedex, IBM, Goodyear Tire & Rubber, Aon, Unisys and Monsanto.

Company pension plans were hit by a ‘perfect storm’ of falling equity values and declining interest rates about two years ago. Despite active petitioning by investment bankers, few pension plans have adopted synthetic packages to smooth their asset and liability management mismatches. Equally few plans have switched out of equity investments.

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: