Pension Funds Pinched, Stirring Calls for Reform Christian Science Monitor Online (09/03/03) ; Francis, David R.
Whether poor planning or the fall of the stock market has caused pension shortfalls, over 300 companies in the Standard & Poor's 500 Index have traditional pension plans that are at least $226 billion in debt. Congressional members, business lobbyists, and consumer advocates are seeking reform for the pension system, but short-term solutions will not solve the long-term crisis. Many companies are entering into debt in order to fund their pensions, but like in General Motors' case, it will be awfully difficult to recoup their losses with increased sales, especially in a depressed economy. Not only are private pension funds in dire straits, but the Pension Benefit Guaranty Corp., which takes over pension plans for failing companies, is also saddled with too many debts and high-risk pensions. Analysts are concerned that companies will invest less in equipment and other capital goods, thus further hindering economic recovery, but others are hopeful that even piecemeal congressional reforms will enable companies to fund their pensions and continue to spur economic growth. Currently, lawmakers are considering changing how pension obligations are calculated, using the corporate bond rather than the 30-year Treasury bond in order to reduce pension liabilities. However, critics are concerned that the additional tax incentives within the proposed legislation would be too costly to the federal government in terms of necessary revenue, while at the same time allowing companies to cover up their underfunded pension plans.