American corporate pension plans are underfunded by approximately $388 billion, according to a recent study by Credit Suisse.
“The recent market turmoil has been unkind to many portfolios,” says the report, The Magic of Pension Accounting, Part V. “But it has been especially painful for defined benefit pension plans as they get hit with the double whammy of a falling stock market (driving plan assets lower, around 47% of aggregate plan assets are still in equities) and falling interest rates (driving discount rates lower and pension obligations higher). We are estimating that the pension plans of the companies in the S&P 500 have deteriorated by $139 billion so far this year to approximately $388 billion underfunded now (77% funded).”
Credit Suisse estimates there are now 326 underfunded pension plans in the S&P 500, an increase from 314 as of the most recently reported year-end. As well, the firm estimates “there are 243 companies with pension plans that may be less than 80% funded, that’s 71% of the S&P 500 companies that offer defined benefit plans and provide information on the funded status. This compares to the 166 companies that had plans less than 80% funded when they were last measured.”