US - Large US corporate pension plans posted their sharpest declines in three years in 2002.
New findings from Connecticut-based consultants Greenwich Associates showed that defined benefit corporate plans lost over US$500bn in asset value last year.
Greenwich Associates polled 574 corporate funds and described the 2000-2002 period as probably the most destructive in the whole history of the US fund business.
“Pension fund liabilities are becoming so large they may impede the ability of American business to function effectively,” said Greenwich consultant and co-author of the report, Chris McNickle.
There were also drastic drops in solvency ratios - the ratio of actual funds to projected liabilities - which tumbled from 121% in 1999 to 103% at the end of 2001.
Among corporate funds with over $5bn in assets, the drop was from 125% to 99%.
Last year’s chaotic markets ensured that this situation deteriorated further.
Just two years ago, fewer than 10% of corporate funds were underfunded. By the start of 2002, nearly 30% were “underwater”, said co-author and consultant, William Wechsler.
“And in many cases plans are billions of dollars below where they need to be to achieve full funding status,” he added.
Greenwich showed that the number of companies shoring up contributions to their pension plans rose from 37% in 2000 to 44% in 2001, with the remaining 56% planning to do so.
General Motors, IBM, Citigroup, Johnson & Johnson and Honeywell were among the leading big-name contributors.
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