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.