Newsfeeds
by News Monitor
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December 17th, 2008
Published in Market Watch December 16, 2008 by Christopher Hinton
Pension portfolios at some of the nation’s top corporations have seen a sharp drop in value this year as the recession hammers away at the stock market, leaving many pension plans without enough funds to cover their promised benefits.
That leaves companies in a sticky situation. Though U.S. law says defined-pension plans don’t have to be fully funded until 2013, Standard & Poor’s 500 companies are still looking at a combined 20% shortfall for their programs this year at a time many need to preserve cash to weather the current economic malaise.
Link to full article.
Filed under: Newsfeeds
Tags: Business Strategy, Economic Crisis, Pension Plans
Expert Perspective
by Robert Cirkiel
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December 16th, 2008
Expert Perspective by Grahall’s Robert Cirkiel
In an article published in Market Watch on December 16, 2008, Christopher Hinton (journalist for Market Watch) addresses the issue of pension plan funding and says: “Some companies think they have a solution though by contributing their own stock to the plan in lieu of cash, particularly if they think the market is undervaluing their shares.”
With the advent of PPA funding rules in 2009, and with pension funding levels very low due to market losses, a number of public companies will fund their pension plan with stock in lieu of cash. This is a double-edged sword. For example, the article points out that the plan potentially can gain tremendous influence over the company. Also, the plan now has more at risk since pension distributions tend to be counter-cyclical to company performance (since staff terminations and retirements increase in those times.) Said another way, when the plan most needs money, it will have the least. Email Robert Cirkiel at robert.cirkiel@grahall.com
Filed under: Expert Perspective
Tags: Business Strategy, Pension Plans, Shareholder Value, Total Rewards Strategy
