Investing September 12, 2002

"Pension Crisis" Looms for Some: Fitch

September 12, 2002 (PLANSPONSOR.com) - Underfunded pensions and anemic investment returns can drain a company's capital that might be more productively invested elsewhere.
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That was the finding of a research report by Fitch Ratings about the current state of US defined benefit plans.

The situation in many companies rises to the level of a “pension crisis” that could challenge their liquidity, Fitch said.

The resulting problems, according to Fitch are:

  • substantial increases in pension expense or substantial pension income decrease
  • significant charges to comprehensive income from changes in a plan’s funded status
  • increasing requirements for cash contributions to a plan.

The new report also highlights that although it is difficult for anyone outside of the company to determine pension-related cash needs, investors have some tools to assess future pension requirements.

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