The Gap Between What's In Corporate Pensions And What They Owe Retired Workers Grew Again

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http://www.businessinsider.com/corporate-pensions-still-fall-short-2013-4

NEW YORK (Reuters) - The funding shortfall bedeviling the 100 largest U.S. corporate pension funds rose for a second straight year in 2012, as a strong stock market and hefty plan contributions failed to offset damage done by persistently low interest rates, according to an analysis by Towers Watson released on Monday.

The gap between what these corporations, all publicly traded, will owe retired workers and how much they have put aside jumped 17 percent, from $252.7 billion at year-end 2011 to $295.2 billion at year-end 2012. By comparison, these companies had a pension surplus of $86 billion in 2007.

Companies are required to calculate the present value of the future pension liabilities by using a so-called discount rate, based on corporate bond yields. As those rates fall, the liabilities rise.

An unprecedented level of lump sum buyouts and annuity purchases partially offset the increases in both assets and liabilities - due to lower interest rates. Without the buyouts and annuity purchases, obligations would have increased by 12 percent.


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