Markets Weigh On Tyco's Pension "Bill"

August 16, 2002 ( - Tyco International Ltd, whose pension plans swung to an $899 million deficit last year, could have to come up with hundreds of millions of dollars next year to comply with US pension laws, according to a news report

A recent Morgan Stanley study reported on by Reuters, estimated the deficit at Tyco’s pension plans could balloon to $1.71 billion this year if assets post a 5% loss with continuing weak markets. The deficit would trigger a $210 million contribution to Tyco’s US pension plans, the Morgan Stanley report estimated.

Tyco is not alone in a pension squeeze that could force numerous Standard & Poor’s 500 companies to shell out billions of dollars to strengthen corporate- retirement plans hit hard by the stock market’s decline, the Reuters story said.

The Morgan Stanley study said the net pension surplus among S&P 500 companies fell to $4 billion in 2001, far below 1999s $292 billion figure. If pension asset returns remain low, more company plans could find themselves in a deficit.

Tyco’s pension plans were in good shape in 2000, showing a $104 million surplus, according to company financial statements. But last year, Tyco’s pension benefit obligations soared 46%, largely due to acquisitions, while the fair value of plan assets grew less than 1%, according to Tyco’s 2001 annual report.

The largest dollar deficits in 2001 among S&P 500 companies were at General Motors Corp. Delphi Corp, US Airways Group Inc., AMR Corp., and Pharmacia Corp., according to the study. GM is addressing the issue, and said in July it expects it will need to contribute no more than $2.5 billion to its pension fund by mid-2004.