Pension Plan Health Rises With Rates : Retirement: Study finds 75% of plans are fully funded, but not because companies have contributed more.

The financial health of pension plans improved in 1994 for the first time in six years, but the change resulted from a rise in interest rates rather than increased employer generosity toward workers, a study shows.

The study released Wednesday by a prominent benefits consultant shows that the number of fully funded pension plans rose sharply last year, reversing a decline that began in 1988. When a pension plan is fully funded, it has enough assets to cover obligations to retired and current employees.

The study by Buck Consultants Inc. comes as Congress is debating Republican legislation that would allow U.S. corporations to tap billions of dollars in pension plan money for other uses.

Businesses back the proposal, while the Clinton Administration and labor advocates call it a reckless strategy akin to plundering worker retirement money.

Buck’s study covered 489 large U.S. companies and was described by the firm as indicative of broader trends.

It found that 75% of the companies had fully funded defined-benefit plans in 1994, compared to 60% in 1993. The figure was 95% in 1988.

A defined-benefit plan pays a predetermined amount upon retirement regardless of what happens between now and then. Nearly 26 million Americans are enrolled in such plans, Labor Department figures show.

“Corporate America’s defined-benefit pension plans are getting ‘healthier,’ ” Buck said in a news release.

But the reason for the improvement lies not in more generous employers, but in the way pension fund health is determined. That calculation is influenced partly by the behavior of interest rates.

A sharp rise in rates last year increased returns on investments made for pension plans. The net result was that a greater percentage of the plans were fully funded.

This doesn’t necessarily signify a trend, said Larry Wiltse, Buck’s director of forecasting and planning services. If interest rates decline significantly, more pension plans could be underfunded this year.

The Pension Benefit Guaranty Corp., the federal agency that insures pension plans covering 41 million Americans, said the study results shouldn’t be interpreted to mean that pension plans are healthier.

“Pension plan funding is volatile and responds to fluctuations in interest rates,” said Martin Slate, executive director of the agency. “PBGC has found that a pension plan that is over-funded today can be underfunded tomorrow.”

Pension funding has become an increasingly emotional issue, as private employers have sought to minimize their contributions or tap funds they have reserved for retirees. Many companies have changed their pension benefits so that employees must decide how their retiree money is invested.

“What’s happening is that companies aren’t putting more money in these plans; they’re shifting more responsibility to workers,” said Karen Ferguson, director of the Pension Rights Center, a Washington-based lobbying group.