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Pensions PAYG Benchmark

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Pension Benefits v Contributions 2014 nov-dec (54)Very early on the education of a pension actuarial student encounters the pay-as-you-go (PAYG) “funding” method, under which contributions simply equal benefits. Except for the occasional reference to our Social Security system, which is basically run on a PAYG basis, the student then leaves the method behind for the majority of practice. Except for nonqualified deferred compensation plans for executives, numbers for which are a material piece of the pension numbers reported on corporate financial results — since those plans are unfunded, their contributions are made on a PAYG basis. In fact, during periods when companies have been on a “contribution holiday” for their qualified pension plans due to previous advance contributions (e.g., as was recently the case for GM), their domestic pension contributions are comprised entirely of PAYG amounts paid to their nonqualified deferred comp programs. Aside from those actual PAYG amounts, the PAYG basis offers a useful benchmark for assessment of total contributions made to all pension plans sponsored by an employer.

This chart shows results for 54 public U.S. employer with 2014 fiscal years ending in the 4th quarter of 2014 that have released their 2014 annual financial statements by 13 February 2015. For those companies, the chart shows aggregate pension benefits paid (smooth higher orange line) and aggregate employer contributions to pension plans (volatile lower blue line) for fiscal years 2000 through 2014.

My usual general cautionary notes apply, including that: these numbers also include pension contributions to foreign pension plans maintained by some of these employers. 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

14 February 2015 at 4:26 am

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