Companies face $409 billion pension deficit: study

http://www.reuters.com/article/businessNews/idUSTRE50742S20090108?feedType=RSS&feedName=businessNews >

Companies face $409 billion pension deficit: study >

Thu Jan 8, 2009 4:19pm EST >

NEW YORK (Reuters) - Volatile markets have saddled U.S. companies with a $409 billion deficit on pension plans, reversing a $60 billion surplus a year earlier, and will cut into earnings in 2009, consulting firm Mercer said. >

As of December 31, pension plans among members of the Standard & Poor's 1500 had $1.21 trillion of assets and $1.62 trillion of liabilities, Mercer said in a report released on Wednesday. At the end of 2007, pension plan assets totaled $1.66 trillion and liabilities totaled about $1.6 trillion, Mercer said. >

The S&P 1500 is a broad portfolio representing large-cap, mid-cap and small-cap segments of the U.S. equity markets. >

The shortfall suggests that more companies will have to pump cash into their pension plans to ensure they can meet their commitments to retirees. >

Mercer estimated pension expenses will increase to about $70 billion this year from $10 billion in 2008, reducing overall profitability by about 8 percent. >

"The decline in funded status will be capitalized and reflected in corporate balance sheets for many companies," Adrian Hartshorn, a member of Mercer's financial strategy group, said in a statement. >

He said this will reduce balance sheet strength and could affect companies' ability to make capital expenses, meet loan covenants and preserve their credit ratings. >
Mercer is a unit of New York-based Marsh & McLennan Cos Inc, which also runs a large insurance brokerage. >

(Reporting by Jonathan Stempel; Editing by Andre Grenon) >

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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.