DB Plans Ended 2003 Stronger, but Many Still in the Red

August 11, 2004 (PLANSPONSOR.com) - The markets might have shown some strength in 2003, but interest rate changes and current accounting rules increased pension obligations to keep most defined benefit plans underfunded, Standard & Poor's reported.

S&P’s Pension Status Report for the S&P 500 found that for 2003, the position of the 362 S&P 500 companies with defined benefit pensions improved to $165 billion underfunded from $219 billion underfunded at year-end 2002.

For 2003, pension assets grew 17.2%, while obligations grew 9.3%. Some 49 issues were overfunded, while 290 were underfunded. By contrast, in 1999, S&P 500 issues were over-funded with a surplus of $280 billion as 296 issues were overfunded and 86 were underfunded

“With hopes for moderate market gains and modest increases in interest rates in 2004, funding should improve but end the year still underfunded at $112 billion,” predicted David Blitzer, Standard & Poor’s managing director, in an S&P news release. “While 401(k) plans garner much of the attention, traditional pension plans remain very important to many workers and can pose financial issues for companies facing difficult times. Even though pension plans as a group are underfunded, there is no immediate danger to monthly pension benefits for the vast majority of employees.”