Pension plans are making news-from local and state governments to large corporations. They are being cut back, eliminated or, for many, in trouble without the workforce recognizing the extent of the problem.<\/p>\n
Most firms have been forced to prop up their plan’s health with additional cash contributions, while many other firms are simply hoping the financial markets, as they did during 2009, will bail them out.<\/p>\n
Meanwhile, for others, the plans are so underfunded, it is just a matter of time before the inevitable takes hold-larger than expected\u00a0contributions\u00a0or a bailout by the Pension Benefit\u00a0Guaranty\u00a0Corp. Those firms have been able to make it this far due to overzealous actuarial assumptions which have moderated the true liability. However, with both stocks and hedge fund performance below zero the past three years, which firms stock prices are the most vulnerable?<\/p>\n
The list below shows the bottom 20% of that S&P grouping, with each firm on the list underfunded to the extent such amounts to at least 5% of both their total debt (including\u00a0capitalizing\u00a0the operating leases, shown as a\u00a0separate\u00a0column), and 5% of its current stock price.\u00a0 Many are in much more precarious position, as is shown. \u00a0In addition, each company on the list has both an expected return on plan assets and a discount rate at least equal to the market average. Of the S&P group of companies, the average investment assumption is 8% and the average discount rate 5.8%, both of which is presently too high and understates the true liability confronting firms with defined benefit plans. The firms on the list have expectations\u00a0greater\u00a0than that! Also shown are last fiscal year\u2019s plan contributions, benefits paid and projected benefit obligation (PBO).<\/p>\n