Pension Losses Will Hurt Many Firms' Bottom Lines Seattle Times Online (07/09/02) ; Scott, Alwyn
A vicious cycle could cripple retirement funds, companies' bottom lines, and the stock market if it is not broken soon. Corporate pension funds, like those at Safeco, Alaska Airlines, Airborne, and Paccar are running short of money, and continue to suffer losses as the stock market falls. While many pensions were overfunded during the boom, companies are finding that losses are going to hit their earnings reports as they put more money into underfunded plans. Since earnings are key drivers of stock prices, and underfunded plans are going to reduce earnings in the next few years, stock prices are bound to continue falling, and so will retirement gains. Of the 14 funds examined by the Seattle Times, only three were not underfunded. Experts predict that the $1.5 billion gap, which increased from $400 million in 2000, will increase to $3 billion in 2002 and remain at that level throughout 2003. Those companies with defined-contribution plans rather than defined benefit plans have shifted the risk away from their bottom lines onto the employees.