johnny inca

Pension Underfunding: The Next Earnings Shock?

This story may be "below the headlines" but is hardly news to any analyst. With the adoption fo fas 158, its realitively easy to get GAAP #'s on a plan's status on a quarterly a basis and make projections. Any EPS / REV guidance you get from a company these days will most assuredly include up to date EPS impacts from the pension plans based upon market values of assets.

The only government interference at this point is a delaying of the tightening funding requirements set by PPA in 2006.

Pension Underfunding: The Next Earnings Shock?

Tyler, you could have written a factual piece without all the buzzword blathering and scare tactics.

It would also help if you actually knew what you were talking about.

For instance:

>>The median assumed asset return for companies sponsoring US pension plans is 8.0%, and, which is scarier, many companies used expected ROAs in excess of this median in order to keep funding requirements to a minimum (click on chart to enlarge).

Um, no. You are thinking of the FASB's expected return on assets assumption, which is used to determine pension cost under FAS 87. Discount rate setting for federal funding requirements is prescibed by law and is nowhere near 8%.

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This is a very very complicated subject, so please don't presume to speak on technical matters to which you have no training or expertise.

The long story short is that plan sponsors who have suffered investments losses, which is almost all of them, will face increased cash requirements and GAAP / IFRS earings and balance sheet impacts which could be onerous relative to the size of their organization.

Preview from Europe: Fresh Fears of Bank Nationalization

NVTL is the other safe stock to own. Actually, it's one of the few stocks going up besides the ultrashort ETF's.