Friday, April 14, 2006
Proposed changes to the way US companies account for pension obligations could knock an average of 8 per cent off the net worth of 100 of America's biggest companies, according to a new study.
The findings come as Congress negotiates rule changes designed to make companies more responsible for the pension promises they make to employees, amid growing concern about obligations being reneged upon or dumped on to the federal government.
Milliman, a firm of actuaries, calculates that 100 big companies' pension plans remain underfunded by just under $100bn (£57bn) in aggregate when assumed future pay rises are considered, in spite of three years of better than expected investment returns. The companies made an average 11.3 per cent return last year against an expected return of 8.5 per cent.
The study covers companies with "defined benefit" plans, which guarantee a percentage of salary at retirement and are on the wane in the US because of rising costs and volatility.