Mixed outlook on pension funding
December 30, 2003Compare this from Reuters — “Pension Gap Widens Despite Rising Stocks” with this from the Boston Globe — “As stock market rallies, pension deficits at major US corporations begin to ease.”
Apparently market returns have helped reduce underfunding of some major corporate pension funds but, as even more optimistic Boston Globe piece admits, “Companies aren’t out of the woods yet.”
Companies which have substantial pension obligations under defined benefit plans theoretically offer employees more retirement security — a defined-benefit — compared to those offering only defined contribution retirement plans (e.g. 401(k) accounts). With the latter, the employee bears the investment risk, as the ultimate retirement benefit is not defined, but depends on level of contributions and investment performance. But companies which made generous defined benefit commitments have major headaches when investment performance is below expectations, as these articles suggest.
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