The Pension (Non-)Crisis

By December 8, 2005General

Caught another breathless “sky is falling” bit on the telly this week on pensions. As part of it, they interviewed a pension expert and put up a graph showing that a whopping 71 pension plans were frozen or terminated in 2004. (This number had risen slightly since 2003, thereby cementing the crisis concept). Clearly if you’re in one of those plans, it’s a crisis, no doubt about that.

But it got us wondering — how many plans are out there? Funny you should ask. NAM pension expert Bob Shepler tells us there were 29,651 plans in 2004. We did a quick back-of-the-envelope calculation and figured out that 71 plans represented about .2% (That’s not two percent, that’s two-tenths of one percent). To put it differently, that would mean that 99.8% of all plans are not frozen or terminated. Sure puts it in context, doesn’t it?

Keep it in mind next time you read about the crisis and — worse yet — the various “solutions” floating around out there, many of which would put the 99.8% of healthy plans at risk.

Join the discussion 2 Comments

  • martin reiser says:

    Credit Rating Proposals Just do not Rate

    The use of credit ratings to determine funding or PBGC premium obligations would be harmful to plans, companies, and the PBGC.

    The overwhelming majority of companies that fall below investment grade do not default on their bonds, fall into bankruptcy, or dump their pension plans onto the PBGC.

    Imposing new funding requirements or increased premiums would put severe additional pressures additional pressures on companies experiencing a downturn in their business cycle. Those pressures will undermine companies? ability to recover, a result that makes no sense for workers, taxpayers and the PBGC.

  • The 71 plans was out of those plans in the fortune 1000 that still had a DB plan at the end of 2003. It was actually about 12% of that group that took action. Over 95% of all Defined Benefit plan participants work at Fortune 1000 firms. At the height of private DB plans over 50% of private workers over age 21 were active participants. At the end of 2003 it was 17%, and with the freezes and terminations of 2003, 2004 and 2005, it is likely down to a number closer to 15%. Call this what you will, but it is a far more serious issue than suggested by Pat Cleary, even if not a crisis. Statistics never lie but …………..