NEW YORK -- Nearly two-thirds of U.S. corporate pension plans are underfunded, according to a survey released on Wednesday, in a sign of the pension squeeze facing corporate America.
The percentage of employers with fully funded pension plans fell to 37 percent in 2002 from 84 percent in 1998, according to a survey by Washington-based consulting firm Watson Wyatt, a unit of Watson Wyatt & Co.
The 2002 data is based on a survey of 419 companies.
Many U.S. companies, including automakers General Motors Corp. and Ford Motor Co., face big liabilities in their "defined benefit" pension plans, traditional retirement plans that promise workers specific benefits based on salary and years of service.
"Plans are less well-funded than they were several years ago," David Speier, a senior actuary at Watson Wyatt, told Reuters. "The driver is the drop in the market."
Watson Wyatt said more corporate pension plans are likely to be underfunded in 2003 if the stock market weakness continues and interest rates remain low.
In fully funded pension plans, the market value of the plan's assets is sufficient to cover at least 100 percent of benefits accrued by employees to date.
When plans are underfunded, it does not mean employees' benefits are in jeopardy. Instead, companies must inject money into the plans to make up for the shortfall. After three years of stock market losses, many companies face the prospect of shelling out billions of dollars to strengthen their pension plans.
The survey found that companies are altering their funding practices to boost the long-term finances of these plans, such as by making plan contributions that exceed minimum funding levels required by the Employee Retirement Income Security Act.
Seventy percent of companies were funding their pension plans above the minimum levels in 2002, compared with 52 percent a year earlier, according to Watson Wyatt data.
"You've got a market dropping and companies stepping up and funding the difference," Speier said. "It means even in a tough economic environment they are funding the plans."