S&P 500 Pensions Expected to Report Broad Losses for 2008; Stage is Set for Record Underfunding

NEW YORK, Dec. 23 /PRNewswire/ -- Devastated by what is amounting to the worst stock market performance since 1931, S&P 500 pension funds are expected to report broad losses in their $1.5 trillion portfolio for 2008, and potentially post record setting underfunding, Standard & Poor's Index Services announced today.

According to Standard & Poor's Index Services data and estimates, S&P 500 defined benefit plans as a group was overfunded by $63.4 billion in 2007, their first surplus year since 2001. The 2008 year-to-date equity declines of approximately 41% for the S&P 500 and 44% for the S&P Global Broad Market Index are expected to drastically reduce the equity value held by U.S. plans (approximately $780 billion) and non U.S. plans (approximately $140 billion).

"Massive losses in the equity markets will require companies to either sell assets at their depressed levels, or shore up assets with significant cash infusions," says Howard Silverblatt, Senior Index Analyst at Standard & Poor's and the author of the research.

While assets will decline, Standard & Poor's Index Services also expects discounted pension liabilities to fall slightly due to the higher discount rate used in their computation. The result is that pension funds will be underfunded on an aggregate basis by $257 billion (17.9%), easily surpassing the record $219 billion under funding set in 2002.

"Standard & Poor's Index Services expects that many issues will be required to add funding to maintain minimum requirements, and that more issues will voluntarily add funding to take advantage of pension smoothing accounting," notes Silverblatt.

The smoothing, or averaging of historical returns, essentially flattens the pension performance over several years -- preventing strong swings in funding. In extreme markets, such as this year, it will reduce reported losses (as they are spread over several years), and similar to 2002, could actually permit some funds to report gains for 2008.

"In reality, any pension fund manager that came remotely close to breaking even in 2008 is quietly celebrating that they survived one of the worst markets in the modern era," concludes Silverblatt.

For more pension research from Standard & Poor's Index Services, please visit: www.marketattributes.standardandpoors.com.

    STANDARD & POOR'S INDEX SERVICES
    S&P 500 SUMMARY PENSION DATA
    Values in $ Millions unless otherwise noted

    DATE          PENSION    PROJECTED    PENSION   PENSION       GAAP
                   ASSETS      BENEFIT       FUND      FUND     INCOME
                           OBLIGATIONS     STATUS     LEVEL

    2008 EST*  $1,175,328   $1,432,063  -$256,736   -17.93%   $419,081
    2007       $1,504,516   $1,441,135    $63,380     4.40%   $587,232
    2006       $1,470,964   $1,511,301   -$40,184    -2.67%   $708,486
    2005       $1,318,010   $1,458,439  -$140,430    -9.63%   $599,571
    2004       $1,265,338   $1,429,667  -$164,328   -11.49%   $545,143
    2003       $1,113,478   $1,278,265  -$164,787   -12.89%   $450,372
    2002         $950,963   $1,169,472  -$218,509   -18.68%   $253,516
    2001       $1,089,896   $1,086,950     $2,946     0.27%   $222,743
    2000       $1,238,920   $1,012,893   $226,027    22.31%   $432,729
    1999       $1,274,083     $994,061   $280,022    28.17%   $397,122
    1998       $1,144,454   $1,018,479   $125,975    12.37%   $299,585
    1997         $991,008     $793,773   $197,235    24.85%   $306,274
    1996         $859,478     $723,084   $136,395    18.86%   $292,739
    1995         $750,907     $676,150    $74,756    11.06%   $250,267
    1994         $641,749     $573,707    $68,042    11.86%   $221,147
    1993         $650,713     $588,333    $62,379    10.60%   $153,287
    1992         $609,356     $532,718    $76,637    14.39%   $131,260
    1991         $612,080     $518,013    $94,066    18.16%   $107,026

      *S&P Index Services

About Standard & Poor's Index Services

Standard & Poor's Index Services, the world's leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Its family of indices includes the S&P 500, an index with $1.5 trillion invested and $4.85 trillion benchmarked, and the S&P Global 1200, a composite index comprised of seven regional and country headline indices. For more information, please visit www.standardandpoors.com/indices.

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