Pensions of S&P Firms Did Well in 2007

May 19, 2008 ( - New data from Standard & Poor's Index Services shows that S&P 500 defined benefit pension plans returned to their overfunded status in 2007 with $63 billion in excess assets.

However, according to an S&P news release, Other Post Employment Benefits (OPEB) remained severely underfunded with $269 billion in shortfalls. OPEB primarily consists of medical and pharmaceutical drug plans.

According to an S&P news release, S&P 500 defined benefit plans were $63.4 billion overfunded for 2007 compared to an underfunded status of $40.4 billion in 2006.

Funding improved to 104.4% in 2007 from 97.3% in 2006, but continues to remain well below the 128.2% level in 1999. Fully funded plans increased to 127 in 2007 from 85 in 2006 and 47 in 2005, S&P said in the announcement.

Within the S&P 500, the aggregate OPEB underfunding declined from $293.7 billion in 2006 to $269.1 billion in 2007. The funding status also improved from 23.9% to 26.2%, but was significantly behind the 104.4% funding for pensions. Similarly, only six companies are over funded for OPEB compared to 127 for pensions.

“The situation for OPEBs continues to be bleak as global pressures are forcing U.S. companies to scale back benefits to remain competitive in markets where many of their peers do not have these expenses,” said Howard Silverblatt, Senior Index Analyst at Standard & Poor’s, in the news release. “Standard & Poor’s expects the pullback in benefits to continue as companies increase co-payments and premiums, cover fewer employees, and shift a greater portion of the expense to workers and retirees.”

As for 2008, Silverblatt says the 8% projected return by the funds is running over $100 billion short at this point; however, cautious optimism has returned. “Based on our projections, Standard & Poor’s expects to see 2008 pensions remaining fully funded on an aggregate level, with companies contributing a bit more than they are currently expecting.” Silverblatt asserted in the news release. 

The full report is available here .