Higher interest rates that boosted returns and increased company contributions helped shrink the shortfall of the 50 most underfunded pension plans by a dramatic 66% last year.
Pension Benefit Guaranty Corp. said Wednesday that the underfunding at these companies totaled $13.5 billion, down from $39.7 billion in 1993 and the first decline since the agency began listing the biggest deficits seven years ago.
The government's pension insurance agency reported last week that total underfunding of all federally insured pension plans was $31 billion last year, down from $71 billion in 1993 and the first drop in a decade.
Sixteen companies were erased from the biggest-shortfalls list because of improved funding, the agency said. Half of them made larger contributions than normally required.
For instance, General Motors Corp. put into its employee plan about $10 billion more than its annual requirement. It was the last auto maker on the list. Chrysler Corp. was removed in 1993.
Seven of those companies removed from the list contributed a total of nearly $800 million above the required amount, including AK Steel Corp., Goodyear Tire & Rubber Co., Inland Steel Industries Inc. and Loews Corp.
Some of the companies that remained on the list agreed to provide new contributions and other protections.
Despite the additional contributions, the agency said a core of underfunding persists. It said that as a group, the 34 companies whose underfunded plans were on the 1993 list show about the same amount of underfunding if interest rates are kept constant.
About a third of the underfunding on the 1994 list was in the steel industry, up from a fifth in 1993.
Other industries include instruments, accounting for 15%, up from 6% in 1993; transportation equipment, 12.6%, up from 6% in 1993; and airlines, 7%, up from 3% a year earlier.
Still, the agency emphasized that inclusion on the list does not necessarily mean a pension plan is at immediate risk. But it said about 70% of the greatest underfunding--$9.5 billion--is in plans sponsored by companies with below-investment-grade bond ratings.
The agency bases its determinations on the value of assets that would be needed to pay guaranteed benefits if a plan were terminated and taken over by the agency.
Although people in most underfunded plans are covered by federal insurance, many face risks because the agency's guarantee is limited this year to $2,573.86 a month.
The agency is financed largely by insurance premiums paid by companies that sponsor the plans.