That according to the Wall Street Journal, citing a report by Goldman Sachs analyst Frank Governali – who said that SBC made the change during a year when the fund’s investments shed 7%.
In 2001, SBC’s more generous assumptions about pension investments accounted for two-thirds of the growth in its operating earnings per share, according to Governali’s report. Operating earnings rose nine cents, with six cents coming from the changed pension assumptions.
However, the change in assumptions is in line with the firm’s actual long-term returns on its pension assets, SBC’s Chief Financial Officer Randall Stephenson said, according to the report. In fact, the pension investments returned 12.5% during the past decade and 9.5% during the past five years.
In 2000, the average assumption among S&P 500 companies with conventional pension funds was 9.2%, according to Bear Stearns. That year, most companies didn’t change pension assumptions.
Of the S&P 500 companies with traditional pension
plans, 53 companies cut projected pension earnings, 216
didn’t change them, 83 companies increased them and 11
increased them by a percentage point or more.