Pension Plans Face Tougher Times as Funding Levels Dip
Pensions & Investments (10/01) Vol. 29, No. 20 p.1; Kovaleski, Dave

Pension funds have been overfunded for years, but it looks like the contribution holiday could be ending for a majority of employers, especially those in the airline or financial industries. Since the terrorist attacks on the World Trade Center, the economy has been sent into a tailspin, and that is on top of an increase in liabilities by 26 percent in 2000 and falling assets of 2.5 percent, which resulted in a 28.5 percent loss for most pensions. If the fiscal year were to end right now, many funds would be underfunded, leaving many retirees without enough money to survive their retirement. If funds fall below a certain level, large contributions will have to be made in order to stabilize the plans, which would prevent many executives from receiving lump sum payments in the near future. However, plan managers and sponsors can mitigate the economic downturn through fixed income diversification and alternative asset classes, or averaging plan asset values over several years, thereby reducing liabilities.


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