A recent survey by benefit consultant Watson Wyatt Worldwide discovered that nearly two-thirds of pension plans are underfunded, mainly because of poor investment returns and low interest rate assumptions in the last few years.
In a survey of 419 U.S. employers, just 37 percent sponsored fully funded pension plans in 2002, quite a difference from 1998, when 84 percent of employers reported that their plans were fully funded. The likelihood of this statistic improving is slim, unless Wall Street makes a serious change for the better and interest rates increase significantly.
“If interest rates remain low and the overall performance of the stock market remains weak, the percentage of companies with underfunded pension plans is likely to increase even further,” said Kevin Wagner, a retirement consultant in Watson Wyatt’s Southfield, Mich., office, to Business Insurance Daily. “We expect to see many companies struggling in the midst of a very bad economy to make massive cash contributions to improve their funding levels.”