Thursday, June 29, 2006


Bloomberg News reports:
A growing number of the largest U.S. companies are freezing pension plans or dropping them altogether to cut costs, according to an analysis by Watson Wyatt Worldwide.

Of the Fortune 1,000 companies, 113 have at least one frozen or terminated defined-benefit plan or have announced plans for a freeze or termination, Watson Wyatt, an Arlington, Va.-based consultancy, said in a statement. That compares with 71 in 2004.

What they do not report is this intersting piece of information that the Wall Street Journal noted last week:
To help explain its deep slump, General Motors Corp. often cites "legacy costs," including pensions for its giant U.S. work force. In its latest annual report, GM wrote: "Our extensive pension and [post-employment] obligations to retirees are a competitive disadvantage for us." Early this year, GM announced it was ending pensions for 42,000 workers.

But there's a twist to the auto maker's pension situation: The pension plans for its rank-and-file U.S. workers are overstuffed with cash, containing about $9 billion more than is needed to meet their obligations for years to come.

Another of GM's pension programs, however, saddles the company with a liability of $1.4 billion. These pensions are for its executives.

This is the pension squeeze companies aren't talking about: Even as many reduce, freeze or eliminate pensions for workers -- complaining of the costs -- their executives are building up ever-bigger pensions, causing the companies' financial obligations for them to balloon.

The entire article is here.