S&P 500 DB Plans Inch Out of the Red, Other Benefits Fall

June 6, 2006 (PLANSPONSOR.com) - Defined benefits plans for S&P 500 companies were underfunded by $140.4 billion in 2005, according to a Standard & Poor's report released Tuesday.

The 2005 Pensions & Other Post Employment Benefits Report showed this figure is slightly better than the year before, in which these plans posted a $164.3 billion shortfall, according to a news release. Even with decreasing deficits, the climbers pale next to the DB surplus of 1999 of $280 billion at the peak of a bull market.

The report found that funding improved to 90.4% in 2005 from 88.5% in 2004, but remains well below the 128.2% level of 1999. The number of fully funded plans fell to 47 in 2005, from 55 in 2004.

According to the news release, the beginning of 2005 was supposed to show pension deficits easing, as interest rates were expected to rise and evaluation ratios improve. “However, interest rates were little changed for 2005, and the lack of rate increases weighed heavily on lack of reduction in the discounted liability levels,” said Howard Silverblatt, Senior Index Analyst at Standard & Poor’s and author of the report, in the news release.

The report also delves into the state of other post employment benefits (OPEB) at S&P 500 companies, and found that these benefits fared worse than DB plans. According to the release, 295 of the companies offering these benefits underfunded them by a total of $320.9 billion – 129% greater than the 2005 pension shortfall. The funding rate for these benefits is 22.1%.

According to the report, the only companies touting an overfunded record for OPEB in 2005 were Comerica, First Horizon National, PerkinElmer and Principal Financial.

For the full report go here .