Santa Monica, Calif. (May 15, 2003) -- Corporate pension plans got socked with a one-two punch last year, suffering a double whammy of a bear market and falling interest rates which cut pension assets while raising liabilities, according to a new study.
The Wilshire Associates 2003 Corporate Funding Survey on Pensions found that defined benefit pension assets for S&P 500 companies dropped $106 billion to $892 billion while liabilities increased $105 billion to $1.07 trillion. In addition, 89 percent of corporate pension plans are now under-funded, the study found.
"Corporate pension plans were hit with an uncommon one-two punch last year -- declining stock prices and interest rates," said Stephen L. Nesbitt, Senior Managing Director at Wilshire Associates and author of the study. "The result is that now, more and more companies are facing the reality that significant corporate resources might have to be diverted to pay for defined benefit plans." He added that in addition, corporate earnings would be affected as investment losses slowly begin to work their way into income statements.
Fee-only investment advisor Gary Schatsky said smaller companies should be even more concerned about the study’s findings. “S&P 500 companies don’t have credit concerns, but if a small business has an unfunded pension liability and doesn’t have the credit worthiness to make it up, it could eventually be a cause for concern about the company’s well-being and ultimately for the pension’s beneficiaries,” Schatsky told WebCPA. Schatsky said he’d advise smaller firms with this issue to make a concerted effort to manage their money more appropriately and perhaps add more funds to the pension to make sure it’s a fully-funded plan.
A copy of the Wilshire study is available at
-- Tracey Miller-Segarra
