Pension Deficits Could Cost Firms Billions
Three years of plunging stock prices and rising benefit liabilities have thrown many of the largest pension plans in corporate America deeply into deficit -- a situation that will siphon away billions of dollars in cash and reported earnings in the next few years unless the market rebounds sharply.</br></br>That's the picture painted by a survey released yesterday, covering 100 of the largest corporate pension plans, by Milliman USA, a benefits consulting firm. It is based on figures included in companies' annual reports.</br></br>The plans, run by such giants of industry as General Motors Corp., International Business Machines Corp., Boeing Co. and AT&T Corp., have been hit by "a perfect storm" of declining asset values and declining interest rates, said John W. Ehrhardt, an actuary with Milliman. Lower interest rates caused liabilities to rise because of the way their value is calculated, and falling stock prices reduced the assets available to pay them.</br></br>The report shows that collectively these companies' pension plans went from a funding surplus of $183 billion at the end of 2000 to a deficit of $157 billion at the end of 2002. Together their assets dropped from 124.5 percent of their liabilities to 82.4 percent.</br></br>The largest deficit it found, $25.4 billion, was at General Motors, which last year contributed $5.1 billion to shore up its plan. Others with large deficits included Ford Motor Co. with $15.6 billion, Exxon Mobil Corp. with $11.3 billion, IBM with $6.4 billion and Delta Air Lines with $4.9 billion.