CALCOLATRICE

S&P 500 Pensions, OPEB Remain Severely Underfunded; Is Time Running Out For The Baby-Boomers?

S&P Indices Releases Annual Report on U.S. Pension Funding, OPEB Status


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A report published by S&P Indices reveals that S&P 500 defined pensions, despite improving their funding status slightly in 2010, remain significantly underfunded by $245 billion. The report, “S&P 500 2010: Pensions and Other Post Employment Benefits (OPEB), also shows that OPEB remains severely underfunded at $210 billion.

 

Combined, the amount of assets that S&P 500 companies set aside in 2010 to fund pensions and OPEBs amounted to $1.34 trillion, covering $1.79 trillion in obligations with the resulting underfunding equating to $ 455.1 billion, or a 25.5% funding rate. 

 

“Even with a 15% equity return and a market recovery of over 45% over the past two years, S&P 500 companies still could not put a dent into the pension underfunding situation,” says Howard Silverblatt, S&P Senior Index Analyst and author of the report. “However, there is a faint light at the end of this tunnel. Because of the record recovery in 2010, companies are currently in much better shape to handle corporate pensions – now considered an acceptable and manageable expense well within their income and assets levels.”

 

According to the report, estimated pension return rates declined for the 10th consecutive year, dropping to an estimated 7.73% in 2010 versus 7.83% in 2009. Discount rates declined 50 basis points, increasing projected obligations.

 

The S&P Indices report also reviewed the status of Other Post Employment Benefits (OPEB). Within the S&P 500, 296 companies offered OPEBs in 2010. With $274.1 billion in OPEB obligations, only $64.5 billion was funded. While OPEB funding levels have increased in recent years, its funding status (23.53%) still pales in comparison to that of pensions (83.9%).

 

“The American dream of a golden retirement for upcoming baby boomers is quickly dissipating,” adds Silverblatt. “The current underfunded situation leaves few options for a comfortable retirement, and few years for baby boomers to significantly add to their retirement resources…outside of working longer,” concludes Silverblatt.


 

S&P INDICES PENSION REPORT          
S&P 500 2010 PENSION STATUS REPORT: HISTORICAL PENSION DATA    
               
S&P 500 PENSION PENSION PENSION PENSION PENSION PENSION S&P 500
  ASSETS OBLIGATIONS FUNDING FUNDING DISCOUNT RETURN TOTAL
  $ MILLIONS $ MILLIONS STATUS STATUS RATE RATE RETURN
$ MILLIONS RATIO

 

 

 

 

 

 

 

2010

$1,273,321

$1,518,314

-$244,993

0.839

5.31%

7.73%

15.06%

2009

$1,160,202

$1,420,912

-$260,709

0.817

5.81%

7.83%

26.46%

2008

$1,100,149

$1,408,580

-$308,432

0.781

6.29%

7.95%

-37.00%

2007

$1,504,516

$1,441,135

$63,380

1.044

6.13%

8.02%

5.49%

2006

$1,470,964

$1,511,301

-$40,337

0.973

5.75%

8.03%

15.79%

2005

$1,318,010

$1,458,439

-$140,430

0.904

5.11%

8.13%

4.91%

2004

$1,265,338

$1,429,667

-$164,328

0.885

5.80%

8.27%

10.88%

2003

$1,113,478

$1,278,265

-$164,787

0.871

6.09%

8.38%

28.69%

2002

$950,963

$1,169,472

-$218,509

0.813

6.64%

8.63%

-22.10%

2001

$1,089,896

$1,086,950

$2,946

1.003

7.13%

9.15%

-11.89%

2000

$1,238,920

$1,012,893

$226,027

1.223

7.43%

9.17%

-9.10%

1999

$1,274,083

$994,061

$280,022

1.282

7.44%

9.13%

21.04%

1998

$1,144,454

$1,018,479

$125,975

1.124

6.72%

9.06%

28.58%









 


Source: ETFWorld – S&P Indices 



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