Shortfall in Pension Plans Narrows in ’03

The net underfunding of the traditional pension plans of companies in the blue-chip Standard & Poor’s 500 index narrowed to $165 billion at the end of 2003 from $219 billion a year earlier, S&P; said in a report Wednesday.

The shortfall shrank as stock assets in pension plans rose with the market’s rebound.

For the 362 companies in the S&P; 500 with so-called defined-benefit pension plans, assets grew 17.2% to $1.11 trillion last year while the long-term amount owed to pensioners rose 9.3% to $1.28 trillion, S&P; said.

“Even though pension plans as a group are underfunded, there is no immediate danger to monthly pension benefits for the vast majority of employees,” S&P; said.

Still, investors in companies with underfunded plans should be asking more questions, S&P; said. “They need to assess what the obligations of a company are, where the required funds will come from, and how any shift in expenditures will affect future growth,” the firm said.

In 1999, at the height of the last bull market, S&P; 500 companies’ pension plans overall were overfunded by $280 billion.

At that time, 296 plans were overfunded and 86 were underfunded.

At the end of last year, just 46 plans were overfunded and 290 were underfunded.

The largest percentage shortfalls in funding were in the energy and consumer staple-goods industries, S&P; said.

By contrast, the financial services industry overall had a relatively small shortfall.