The Wall Street Journal today has an interesting article: Is Pension Crisis a Scapegoat? The article notes that “[c]ompanies across the country have been taking an ax to their pensions, citing rising costs and the declining health of their pension plans.” The article goes on to say that “[e]mployers eager to cut pensions blame the “perfect storm” of falling stock prices and low interest rates” but that “employees say their pension plans aren’t as sick or costly as their employers claim.” The article mentions a Bear Stearns report released last week which said that pension plans are now on a “path to recovery,” predicting that by the end of 2004, pension underfunding for the 100 companies with the biggest benefit obligations in the Standard & Poor’s 500-stock index will drop to 2%, from 12% at the end of this year.
The most interesting part of the article:
In August, the American Bar Association’s leadership announced that it would be cutting the pension plan for 900 staffers, citing stock declines and low interest rates, even though both trends had reversed themselves this year. But 400 skeptical ABA staffers passed the hat and collected more than $10,000 to hire legal counsel and an actuary to go over the pension plan in detail. The actuary, Kathleen E. Manning of MWM Consulting Group in Chicago, found that the pension plan was well funded, and, in a report presented to the association in August, noted that the liability — and future costs — of the pension looked unreasonably high because the association’s projections assumed that interest rates and investment returns would remain seriously depressed. She added that a likely rise in interest rates and the stock market’s continuing recovery could solve much of the ABA’s potential pension problem.