Overfunding Should Be Allowed on Corporate Pensions: Milliman

The largest corporate pension plans are in a bind—an underfunding bind in which projected benefit obligations exceed assets’ market value by a cumulative $398 billion as of the end of October, according to John Ehrhardt. Ehrhardt, a principal and consulting actuary at Milliman, Inc., has focused on defined benefit plans for more than 30 years, and has worked with dozens of corporate clients on redesigning traditional pension plans, such as a conversion to cash-balance plans. Eleven years ago Ehrhardt started the Milliman 100 Pension Funding Index, which tracks the 100 largest U.S. corporate defined benefit plans and was the first publicly released index based on corporations’ actual pension reports rather than estimates. Ehrhardt recently spoke with Institutional Investor contributing writer Judy Ward.

亚博赞助欧冠机构投资者：今年这一100个计划的资助地位达到了1700亿美元。为什么？

Ehrhardt：这一切都是关于利率的。如果您分解了1700亿美元，它等于利率下降的负债增加17.9亿美元增加，由于市场下降，资产减少率为410亿美元，公司已贡献的新资金减少500亿美元。

How big are the contribution increases for these corporations?

We don’t have the numbers for this year yet, but contributions doubled from $29 billion in 2008 to almost $60 billion in 2010. There were seven companies in our database whose annual contributions increased by more than $1 billion from 2008 to 2010: General Motors, UPS, Lockheed Martin, PepsiCo, International Paper, Citigroup, and United Technologies. I cannot imagine any of these companies will have a decrease in contributions in 2011. Funding those is going to be a little bit of both using cash on hand and tightening up spending in other parts of the company. The thing that is different now than in ’09 is that at least there is cash on these companies’ balance sheets.

Is this underfunding and volatility in funded status likely to remain for the long term?

We expect that almost $60 billion in total contributions to hit $100 billion if not this year, next year. With what [Federal Reserve Chairman Ben] Bernanke said a while back—that interest rates will stay low for at least 18 months—plan sponsors can plan on significant contributions for the next few years. Because of low interest rates, I do not think they will get any liability relief. And I think volatility is here to stay in equity markets.

How are companies changing their pension strategies to deal with underfunding?

I do not think we will see many more freezes, because it does not reduce the near-term funding cost. If you were 75 percent funded before a freeze, you are 75 percent funded after a freeze. A freeze does not reduce your liabilities: It just stops the bleeding.

有些公司正在采取责任驱动投资的步骤（一项侧重于投资资产的战略，这些战略与类似持续时间的债券等债券等债券等债券，但在利率时难以致力于债券的长期承诺历史悠久的低点。我们开始看到一些赞助商使用股权对冲，从而消除了75％的下行风险，同时保持了80％的上行潜力。Milliman保护策略采用期货合约，采用波动管理和资本保护的组合，以保存80％的上行，同时消除了75％的缺点 - 比领策略更有效。养老金计划是新的，但它已经由Milliman与大型保险公司使用，以帮助他们的变量年金合同组合。

我们是否需要养老金资金的监管变化更好地工作？

The thing that has caused the volatility in pension liabilities has been the very rapid decline in interest rates, and the very immediate recognition of those rates in required pension contributions. If you take the volatility out of the interest rates used in calculating liabilities, you take the volatility out of liabilities. The American Benefits Council has proposed continuing to use the two-year average of interest rates, but disregarding rates within those two years that do not fall within 10 percent of the average for the past 25 years.

与过度排放计划有关的罚款较少。我们需要鼓励公司以高于所需的最低资金。他们不应该针对100％的资助状况 - 他们应该至少资助110％。问题是，他们担心利率将会回来，突然间，他们将以125％的人数达到125％，这将在计划终止时触发对公司的任何资产回归的消费税。必须有限制，以便公司没有玩盈余资产的游戏。