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2014 Pensions — Employer Contribution

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2014 Pensions - Employer Contribution all (205)For 205 public U.S. corporations, this chart shows the aggregate global employer contributions to single-employer defined benefit pension plans for fiscal years 2000 through 2014. As I’d anticipated last year, the amount continued to decline . . . and the main reason for that decline had absolutely nothing to do with pension funding relief legislation.

Although ultimate results that I’ll be collecting for broader sets might vary somewhat from my preliminary results, this much I can say: final results will not vary as wildly from these results as too often sees prediction by some of the studies that manage to get trade and business print. Shortly after the 2008 market crash, the head actuary of the largest pension actuarial consulting firm brashly predicted that average employer contributions would increase ten-fold over the next 2-year period. And shortly thereafter a competitor echoed that with its own wild-eyed prediction of a five-fold increase in employer pension contributions for a single recent year. Those ridiculous predictions despite the fact that previous similarly misguided predictions by those two “experts” had failed miserably, with the first source openly confessing to not having a clue as to why their prediction had been so wrong, while the second source offered excuses that were more faulty than the predictions themselves.

Yes, since 2008 pension contributions have generally held higher levels; but the main reason for those higher levels has been that before 2008, many employers had prefunded their pension plans to funded ratios well in excess of 100%, hence were on pension holidays, in many instances giving them required contribution amounts of zero. Let a few years of bad investment returns and lower interest rates end those holidays, and the rate of increase from a zero contribution is naturally going to look huge on a percentage basis. But on a long term basis, averaged over a lengthy portion of average service period of the workforce, has the typical pension contribution amount jumped far above levels that are normal for off-holiday periods? Not at all.

And even if the 2014 results for wider data sets varies noticeably from the preliminary results we’ve seen for the first financial results we’ve collected, don’t expect 2014 to be the exception to that rule. That is, don’t look to see any 2014 increases in aggregate employer contribution amounts. And I’ll make a prediction that can be supported on a more scientific basis than the crazy predictions made by those others: expect pretty much the same for 2015 — the slippage in pension funded status during 2014 will bring contribution increases for enough companies to lift the aggregate contribution amount perhaps back even to the 2012 level. But if we once again see warnings of five-fold increases in pension contributions, just laugh.

Meanwhile, remember my usual general cautionary note (something that keep getting forgotten or shoved to very tiny print in footnotes in most of the industry reports on this sort of info), that these numbers include pension contributions to foreign pension plans maintained by some of these employers, as well as the pay-as-you-go contributions to nonqualified deferred compensation plans for executives. Which I’ll sort out in future revisions to this post.

I’ll be updating this post as more 10-k reports are filed through the remainder of February 2015, then into March and beyond, retaining earlier versions of the post in backpages, as linked in the numbers at the bottom of this post, with oldest versions carrying the higher numbered links.

(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

12 February 2015 at 11:33 pm

Posted in άctuary

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