U.S. Corporate-Pension Funding Gap Doubles

Wednesday, 04 Jan 2012 07:50 AM

  Comment  |
   Contact  |
|  A   A  
  Copy Shortlink
The funding gap for U.S. corporate pension plans almost doubled in 2011 as bond yields dropped and stocks failed to keep pace with rising liabilities, The Financial Times reports.

Credit Suisse calculates that, from a moderate surplus at the end of 2007, pension plan assets at S&P 500 companies now cover only about 74 percent of estimated liabilities, for a deficit of nearly $450 billion.

The bank also says that every 25 basis point fall in the discount rate equals a $45 billion increase in liabilities.

URGENT: ‘Wealth Gap’ Widens to 1929 Crash Level. See the Shocking Footage. See the Evidence.


However, the discount rates used by companies has fallen about three times that much this year.

David Zion, head of accounting and research for Credit Suisse said, “You need really good returns to offset that. The typical pension plan has generated slightly positive returns this year, you can’t say that’s good.”

Because companies are required to contribute the amount of any funding shortfall, spread over seven years, some corporations will have to make greater pension contributions next year barring some kind of pension funding relief passed by the U.S. government, which has previously given companies temporary relief from requirements to fund deficits.

Bankers predict some highly rated companies will seek pension-funding help by issuing corporate bonds because their borrowing rates are low. However, much higher contributions could hit some company earnings.

FTSE Global Markets reports that Mercer’s latest Pensions Risk Survey data shows that the accounting deficit of defined benefit pension schemes in the United Kingdom has increased for the second consecutive month.

© 2014 Moneynews. All rights reserved.

  Comment  |
   Contact  |
  Copy Shortlink
Send me more news as it happens.
Get me on The Wire
Send me more news as it happens.
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
Zip Code:
Privacy: We never share your email.
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
You May Also Like

Passengers Push Plane on Icy Russian Runway (With Help of a Tractor)

Wednesday, 26 Nov 2014 20:45 PM

Passengers on a Russian plane got off to push the aircraft to help get it on the runway after it began slipping on ice i . . .

Bernie Tiede, Convicted Murderer Mortician, to Get New Sentencing

Wednesday, 26 Nov 2014 17:39 PM

Bernie Tiede, the mortician who was convicted of killing his companion Marjorie Nugent in 1996, will receive a new sente . . .

Chrysler Pentastar Logo Getting Phased Out With FCA Formation

Wednesday, 26 Nov 2014 15:51 PM

Chrysler's iconic Pentastar logo is being phased out as the company introduces a new logo in keeping with the newly form . . .

Top Stories

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
©  Newsmax Media, Inc.
All Rights Reserved