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Falling markets and a sour economy have opened a gap of more than $200 billion in the pension plans of S&P 500 companies, including Ford and GM. Will taxpayers get stuck with the bill?
Americans with 401(k) plans in stocks have been feeling queasy for months as they've watched their savings vanish at alarming rates.
But workers covered by traditional pension plans -- the ones 100% funded and managed by companies for employees -- have so far avoided that sinking feeling.
Unlike the 401(k) crowd, they don't get monthly statements bearing the grim news of the lousy performance of the investments in their pension plans.
But with stocks and bonds crushed, many of these old-school defined-benefit plans now look downright wobbly. If the economic weakness continues long enough, many could end up in the hands of the independent government agency responsible for taking over failing plans.
This would mean that, down the road, the agency would likely ask for a $50 billion to $100 billion boost from tax dollars, experts say.
That's right: This would affect you even if you didn't have a traditional pension plan. It's the looming bailout no one is talking about.
Companies offering defined-benefit plans set aside what they think is enough money and then invest it -- often in a roughly 60-30 split between stocks and bonds, putting the rest in other assets, including real estate.
A study released last week by Credit Suisse (CS, news, msgs) leaves little doubt these plans have been pounded by bad performance of both stocks and bonds, creating potential troubles for the more than 34 million workers in the private sector who count on these plans.
<span style="font-weight: bold">Consider these grim statistics: </span>
The funding level of defined-benefit retirement plans at companies in the S&P 500 Index ($INX) alone has dropped by an astonishing $265 billion this year, according to the study by David Zion, an analyst and accounting expert with Credit Suisse.
These plans, at companies such as General Motors (GM, news, msgs), Ford Motor (F, news, msgs) and Unisys (UIS, news, msgs), are now short about $204 billion of the funds they need to cover the projected costs of pensions over the lifetime of those plans. That's a lot of money to make up.
About 340 of the S&P 500 companies now have plans with shortfalls. And 227 of them -- almost half -- have plans that are less than 80% funded. That's a 266% increase from the 62 companies in 2007 with plans that were less than 80% funded.
<span style="font-weight: bold">Which companies have the biggest problems</span>?
Not surprisingly, General Motors and Ford top the list. <span style="font-weight: bold">Much of the talk in favor of allowing the big automakers to go into bankruptcy centers on how it would let them shed pension obligations. Guess who gets the bill if they do.</span>
<span style="font-weight: bold">Unisys</span>, which offers information technology to governments and the private sector, also places high.
These three now have pension fund shortfalls equal to anywhere from about 80% to 180% of their market capitalizations, by Zion's calculations.
read di ress here if so inclined http://articles.moneycentral.msn.com...n-bailout.aspx
Americans with 401(k) plans in stocks have been feeling queasy for months as they've watched their savings vanish at alarming rates.
But workers covered by traditional pension plans -- the ones 100% funded and managed by companies for employees -- have so far avoided that sinking feeling.
Unlike the 401(k) crowd, they don't get monthly statements bearing the grim news of the lousy performance of the investments in their pension plans.
But with stocks and bonds crushed, many of these old-school defined-benefit plans now look downright wobbly. If the economic weakness continues long enough, many could end up in the hands of the independent government agency responsible for taking over failing plans.
This would mean that, down the road, the agency would likely ask for a $50 billion to $100 billion boost from tax dollars, experts say.
That's right: This would affect you even if you didn't have a traditional pension plan. It's the looming bailout no one is talking about.
Companies offering defined-benefit plans set aside what they think is enough money and then invest it -- often in a roughly 60-30 split between stocks and bonds, putting the rest in other assets, including real estate.
A study released last week by Credit Suisse (CS, news, msgs) leaves little doubt these plans have been pounded by bad performance of both stocks and bonds, creating potential troubles for the more than 34 million workers in the private sector who count on these plans.
<span style="font-weight: bold">Consider these grim statistics: </span>
The funding level of defined-benefit retirement plans at companies in the S&P 500 Index ($INX) alone has dropped by an astonishing $265 billion this year, according to the study by David Zion, an analyst and accounting expert with Credit Suisse.
These plans, at companies such as General Motors (GM, news, msgs), Ford Motor (F, news, msgs) and Unisys (UIS, news, msgs), are now short about $204 billion of the funds they need to cover the projected costs of pensions over the lifetime of those plans. That's a lot of money to make up.
About 340 of the S&P 500 companies now have plans with shortfalls. And 227 of them -- almost half -- have plans that are less than 80% funded. That's a 266% increase from the 62 companies in 2007 with plans that were less than 80% funded.
<span style="font-weight: bold">Which companies have the biggest problems</span>?
Not surprisingly, General Motors and Ford top the list. <span style="font-weight: bold">Much of the talk in favor of allowing the big automakers to go into bankruptcy centers on how it would let them shed pension obligations. Guess who gets the bill if they do.</span>
<span style="font-weight: bold">Unisys</span>, which offers information technology to governments and the private sector, also places high.
These three now have pension fund shortfalls equal to anywhere from about 80% to 180% of their market capitalizations, by Zion's calculations.
read di ress here if so inclined http://articles.moneycentral.msn.com...n-bailout.aspx