S&P: Pension Obligations Outpace Assets in '03

Pension asset levels in the S&P 500 companies increased mightily in 2003, riding the 25% increase of the S&P 500, to a total of $1,063 billion from $951 billion a year-end 2002.   However, increasing even more were pension obligations, which soared to a year-end projection of   $1,323 billion, up $160 billion from the 2002 close of $1,163 billion, according to data supplied by Standard & Poor’s.

Additionally, the funding status to market value remained nearly unchanged this year at -2.58% from -2.62% in 2002.   By comparison, at the very apex of the bull market in 1999, S&P 500 funds were over funded, with the surplus representing 2.30% of total market value.  

Even though the pension shortfall continues to widen, S&P equity market analyst Howard Silverblatt ensures investors the companies on the whole have enough processed, either on hand or in their investments, to meet current pension obligations.   Investors should still keep on eye on the situation though, since, Silverblatt cautions,   “Investors need to assess the full obligations of a company, where the required funds will come from and how any shift in expenditures will affect future growth.”

To aide investors in their quest for knowledge, the Financial Accounting Standards Board (FASB) has just released a revised rule number 132, requiring companies to disclose asset allocations, investment strategies, and contributions.   Starting next June, companies will also have to report future benefit payments.  

“Investors need to familiarize themselves with these values and tables, and understand what these figures mean for company growth,” Silverblatt said.

To further assist pension fund watchers, S&P complied a chart comparing this year’s pension funding status with previous years.

STANDARD & POOR’S QUANTITATIVE SERVICES

S&P 500 HISTORICAL SUMMARY PENSION DATA

(Values in $ Billions unless otherwise noted)