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Archive for January 2nd, 2009

Pensions Close Out 2008 Funded ~80%

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apm20081231a

As measured by the Aftermath Pension Index, the aggregate funded status for global pension plans sponsored by S&P 500 companies stood at about 80% at the close of 2008. Projected benefit obligations for those pension plans exceeded the market value of of plan assets by about $320 billion, a loss of almost $380 billion in funded status for the year.

As observed in my pre-Christmas post, the APM’s estimate of a 12/31/2008 funded status is approximately 3 percentage points lower than is likely to be reported in studies that are based on corporate financial statements published as of companies’ fiscal year ends, since any companies with non-calendar fiscal years would not yet have reflected the autumn’s severe pension funded status erosion.

And as is frequently observed in these posts, APM numbers are based on corporate pension disclosures which include foreign pension plans, which typically are less well funded than U.S. pension plans, as well as non-qualified supplemental executive retirement programs, which are typically unfunded. To adjust to an estimate of the aggregate funded status for U.S. qualified pension plans, add about 7 percentage points.

Finally, recall also that basic pension disclosures are based on projected benefit obligations, which incorporate the effect of future estimated salary increases. For the S&P 500 universe, add about 2-3 percentage points to estimate the aggregate funded status without those future increases.

Even so, 2008 is a year that will not soon be forgotten, easily the worst year that pension plans have suffered. Will they survive to see the end of 2009?

Further details on APM methodology are provided in the APM document.

(Remember, as I’ve previously disclaimed, posts such as this represent efforts of my favorite pastime. My formal work does not involve any of this, and none of it represents any position or comment that should in any way be attributed to my employer. Likewise, as always, it represents general personal impressions and should not be treated or used as formal professional advice.)

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Written by macheide

2 January 2009 at 5:02 pm

Posted in άctuary