RSS icon

Top Stories

Watson Wyatt Employers Need to Triple Pension Funding

Under federal funding law, employers in 2009 will be required to contribute $108 billion to their plans compared with just $38 billion in 2008.

January 14, 2009
Recommend (0) Comments (0)
Related Topics: Financial Impact, Retirement/Pensions, Global Business Issues, Latest News
Reprints
Employers’ contributions to their pension plans need to nearly triple this year to shore up plans with funding levels that plummeted due to the equities market crash, according to an analysis released Tuesday, January 13.
 
Under federal funding law, employers in 2009 will be required to contribute $108 billion to their plans compared with just $38 billion in 2008, estimates consultant Watson Wyatt Worldwide.

“It is a staggering burden on employers, especially in a weak economy,” said Alan Glickstein, a senior consultant in Watson Wyatt’s Dallas office.

Watson Wyatt estimates that plans now are funded 75.2 percent on average, a stunning fall from only a year ago when plans had average funding of 97.4 percent.

Responding to lobbying efforts by employers, a federal law enacted last year eases funding requirements. But that relief, which removed a transition rule laid down by a 2006 pension law that required employers to immediately start fully funding their plans if they miss certain funding targets, only slightly reduces the contribution burden employers now face, according to Watson Wyatt. That relief will cut required 2009 contributions by about $16 billion, from $125.1 billion to $108.7 billion.

Without further relief, “companies will still struggle to meet the large and unexpected contributions required,” Watson Wyatt said.

However, several changes that business groups have been urging Congress to pass would cut required contributions this year to just under $66 billion, Watson Wyatt estimates.

Glickstein said legislators are becoming more aware of the severity of the problem for employers and the need for additional funding relief.

“I believe we will get more of what is needed,” he said.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Workforce Management’s online news feed is now available via Twitter.

 

Comments

Hr Jobs

Loading
View All Job Listings