More Companies Sitting On Pension Time Bombs
U.S. pensions are encroaching upon dangerous territory these days, with the amount of under funded plans nearly doubling to $373 billion from just five months ago. For many already financially strapped companies, this means they must somehow come up with even more dollars for contributions if they hope to close pension funding gaps in the future.
As reported March 23 by Bloomberg, the dramatic plunge of U.S. stock prices will saddle 53% of companies in the Standard & Poor’s 1500 Index with defined-benefit plans with about $70 billion in pension expenses this year. That’s a sevenfold increase from 2008.
Dow Chemical and Sears Holdings Corporation are among the companies facing under funded pension plans. Dow, whose pension plan was under funded by $4 billion at the end of 2008, expects to more than double pension contributions to $376 million from $185 million last year, according to the Bloomberg article.
As for Sears, it may need to nearly triple pension contributions to $500 million next year if pension reforms aren’t enacted and the financial markets fail to rebound.
Meanwhile, the state of New Jersey is suing former executives of Lehman Brothers, charging fraud and misrepresentation caused New Jersey’s public pension fund to suffer more than $118 million in losses.
According to the lawsuit filed March 17, “thirst for profit” and “simple greed” on the part of Lehman’s top executives, including former embattled CEO Richard Fuld, were behind the investment firm misstating its financial position when New Jersey bought more than $180 million worth of Lehman shares in April and June 2008.
The lawsuit also contends that Lehman executives provided false and misleading statements about the firm’s liquidity, the value of its assets and its ability to hedge against risk.
As reported in a March 17 article in the New York Times, this is the second lawsuit filed by a government entity that names former Lehman executives as defendants. In November 2008, San Mateo County, Calif., accused Fuld and other Lehman executives of making false statements that ultimately led to a $150 million loss in the county’s investment pool.
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