Administration May 4, 2004

Equity Gains in 2003 Equal Black Ink for Pension Plans

April 5, 2004 (PLANSPONSOR.com) - Robust stock market gains in 2003 have helped 18 companies in the S&P 500 move their defined benefit plans from underfunded to overfunded.
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Large asset gains in the equity markets in 2003 helped pension that were weathering the “perfect storm” just a year earlier move out of the red and into the black with pension surpluses.   Thus, with less money needed for immediate cash infusions into their defined benefit plans, companies can concentrate more cash in other financial initiatives, according to a Barron’s Online report.

Largest among the red-to-black ledger moves was SBC Communications.   In 2002, SBC had a pension deficit of $1.2 billion, which turned over to a $537 million surplus by the end of 2003. This was followed by:

  • Consolidated Edison Inc – $15 million surplus in 2003; $674 million deficit in 2002.
  • Citigroup Inc – $119 million surplus in 2003; $420 million deficit in 2002.
  • Weyerhaeuser Co – $24 million surplus in 2003; $397 million deficit in 2002.
  • Qwest Communication – $2 million surplus in 2003; $385 million deficit in 2002.
  • U.S. Bancorp – $175 million surplus in 2003; $228 million deficit in 2002.
  • JPMorgan Chase & Co – $177 million surplus in 2003; $175 million deficit in 2002.
  • Wells Fargo & Co – $101 million surplus in 2003; $153 million deficit in 2002.
  • EMC Corp – $20 million surplus in 2003; $125 million deficit in 2002.
  • Hershey Foods Corp – $34 million surplus in 2003; $99 million deficit in 2002.

Further good news was found in 26 companies that had pensions that were flush in both years but still saw asset gains.   Among those, Bank One and Tribune saw the greatest percentage gain in assets and General Electric and AT&T had the largest gains in dollar value.  

Even for the 256 companies that had pensions in the red in 2003, the outlook is positive, for two reasons.   First, interest rates are expected to rise which will reduce the amount of money pension are required to promise for payout.   Second, all signs point to a passing of the Pension Relief Act that would set a higher corporate bond rate that companies would benchmark to in lieu of the current 30-year Treasury bond rate.   This in turn is estimated to save companies $80 billion over the next two years.

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