Chicago (Jan. 23, 2003) -- Many companies face huge expense increases this year to make up for investment losses in their pension plans, which could undercut corporate earnings growth and potentially dampen an economic recovery, according to a survey by Deloitte & Touche.

Among the 80 companies surveyed, 40 percent said pension expenses will rise by more than 50 percent in 2003. Another 20 percent expect increases of 26 percent to 50 percent, while 16 percent of respondents see expenses growing between 11 percent and 25 percent, D&T said. The firm polled senior financial and human resources executives from companies with median revenue of $1 billion and an estimated average of 5,000 employees.

Largely driven by this enormous funding squeeze, more than four out of 10 companies are either making or considering making fundamental changes to their defined benefit plans. Twelve percent have already decided on changes and 31 percent are evaluating possible alternatives, such as changing to cash-balance or profit-sharing plans, D&T reported.

Nearly one in three companies surveyed shifted or are exploring ways to shift a greater percentage of their executive benefits into more secure investment vehicles. Historically, executives have carried a greater amount of risk on their retirement benefits, while employees have had the full amount of their retirement benefits secured.

According to David Hilko, practice leader of the Employee Benefits Group for D&T's Chicago office, "More executives will require greater security as part of any employment contract. While this approach is state of the art for now, it soon will become standard."

-- Electronic Accountant Newswire Staff

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