Top Underfunded Pension Funds Cut Deficits Kaiser Officials Say Picture Of Company’s Pension Fund Status Is ‘Misleading’

The country’s 50 most underfunded pension funds cut their deficits last year by two-thirds, thanks to higher company contributions and rising interest rates, the federal government said.

The Pension Benefit Guaranty Corp., the federal corporation that insures corporate pension funds representing more than 41 million workers and retirees, said underfunding tumbled about 66 percent in 1994 to $13.5 billion for the top 50 funds. The drop from $39.7 billion was the first time since 1987 the gap has narrowed.

“President Clinton’s reforms and enforcement program are reducing pension underfunding and bringing retirement security to millions of American workers,” said Secretary of Labor Robert B. Reich.

Houston-based Kaiser Aluminum Corp. was the only company on the top 50 list with significant operations in Spokane. The aluminum producer employs nearly 2,600 people at two plants in Spokane County.

Kaiser spokesman Robert Irelan said the PBGC listing paints a misleading picture of Kaiser’s pension plan funding, which is above the level required by law. Companies by law are not required to be fully funded, he said.

“The bigger problem is not companies such as ours, with $530 million in the pension fund, but companies that have no pension for their employees.”

LTV Corp.’s pension fund had the largest shortfall measured in dollars, at $2.19 billion. Ravenswood Aluminum Corp. had the largest shortfall on a percent basis. Its fund had only 22 percent of the money needed to pay its pension liability.

Many of the companies that made it off the list in 1994 did so by increasing contributions to their pension funds beyond the required amount. General Motors Corp., for example, added $10 billion last year on top of its mandatory contribution.

Other companies that made it off the list by pumping money into their funds include AK Steel Corp., Goodyear Tire & Rubber Co., Inland Steel Industries, Inc. and Loews Corp.

Rising interest rates also helped narrow 1994’s underfunding by swelling pension fund returns. In 1994, the yield on the benchmark 20-year Treasury climbed from 6.5 percent in January to a high of 7.99 percent in November.

If interest rates are kept constant, however, the 34 pension plans that were also on the 1993 list show about the same amount of underfunding.

Companies new to the list include Sears, Roebuck & Co., Chiquita Brands International Inc. and Del Monte Foods Co.

While inclusion on the list doesn’t mean a pension plan poses an immediate risk, about 70 percent of the underfunding on the list, or $9.5 billion, is in companies with below-investment-grade bond ratings.

The companies with the largest pension deficits are concentrated in the steel industry, which represents about one-third of the underfunding, the instruments industry, with 15 percent of the underfunding, the transportation equipment industry, with 12.6 percent and airlines, with 7 percent. For the first time there are no automakers on the list.

The 50 underfunded plans account for about 45 percent of the $31 billion in overall underfunding of plans covered by the PBGC.

, DataTimes