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Fortune 100 pension schemes still underfunded, despite contributions increase

CF this month brought news of a survey showing that, over the last year, CFOs in the US have become more burdened by company pension schemes. Meanwhile, analysis of Fortune 100 companies by Towers Perrin, the human resources consulting firm, has found that, while funding has increased over the last year, deferred pension costs have continued to rise. 

Defined benefit pension plans offered by Fortune 100 companies were 88% funded on average, at year-end 2004, up from 84% funded at the end of 2003, according to estimates by Towers Perrin. The improved funding picture reflects solid investment returns in 2004 as well as increased contributions by plan sponsors. Even with this improvement, however, Towers Perrin estimates that the 81 Fortune 100 companies that offer defined benefit pension plans had aggregate pension underfunding of $79 billion at year-end 2004.

Despite the improvements in funding levels, Towers Perrin's analysis found that deferred pension costs -- that is, costs for pension benefits attributed to past service, but not yet expensed -- rose in 2004. For Fortune 100 pension plan sponsors, deferred costs averaged $3.1 billion at the end of the year, Towers Perrin estimates. For all 81 companies combined, this represents over a quarter of a trillion dollars ($252 billion) in deferred pension costs at year-end 2004.

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