Private Pension Shortfalls Soared in ‘95, Agency Says

The underfunding of corporate pension funds more than doubled to $64 billion during 1995 because of falling interest rates, the Pension Benefit Guaranty Corp. said Thursday.

The gap between pension liabilities and assets rose from $31 billion at the end of 1994 as interest rates dropped to 5.90% for the benchmark 30-year Treasury bond at the end of 1995, from 7.88% a year earlier.

Lower interest rates reduce returns pension funds can make on their investments. Underfunding is calculated by taking the sum of money in a pension fund and estimating how much it will be worth in the future, a calculation that depends on current interest rates. When rates are low, pensions funds don’t grow as fast.

“Pension underfunding persists, and we are addressing it,” said Martin Slate, executive director of Pension Benefit Guaranty, the federal agency that insures pension funds. “We have the reforms in place to improve pension funding over time and a financially sound insurance program to protect workers’ pensions.”

General Motors Corp. had the largest shortfall in dollar terms, at $6.45 billion. Its fund, however, is 91% funded.

Only one California company was among the top 50 underfunded companies listed by Pension Benefit Guaranty: Rohr Inc. of Chula Vista, whose pension fund was 72% funded.