While 2001 was not as bad as the prior year, according to Ryan 2000 was the worst pension fund year in history, with assets underperforming liabilities by 28.5%. That was more than twice the previous worst year of 1995, when pension funds underperformed by 12.5%.
Thus far 2001 has been looking up, with pension fund assets losing to liabilities by about 8.5%.
According to a Dow Jones report, the Ryan findings were based on quantitative research that compared pension asset growth to the amount the funds have to give to their plan participants.
Ronald J. Ryan, president of the New York financial lab, said the 37% plummet in the funding ratio could lead to:
- reduced corporate earnings
- higher participant contributions
- lower credit rating valuations
- higher Pension Benefit Guarantee Corp. insurance premiums.
He predicted that many corporations will report low earnings due to higher pension expenses in the next three months.
Ryan said that corporate pension plans, which use actuarial “smoothing” techniques to spread gains and losses over many years, could be paying for their 2000 and 2001 losses for decades to come.
The aerospace industry, which is “heavily skewed to pensions,” will be especially hard hit, followed by other, older industries such as the automobile, steel and rubber industries, he said.