All quiet on the pension front at the $20 billion club

We’ve been tracking pension activity at the $20 billion club (our name for the 20 or so U.S.–listed corporations with the biggest pension liabilities) since 2011. For our latest mid-year update, there are just a couple of notable things to report.


Steady as she goes

The main source for the $20 billion club analysis is company reporting, such as annual reports and quarterly earnings statements. Most annual reports come out in February, and our main update is issued once those are all available. November is generally a good time for a mid–year update, drawing on the quarterly statements.

Compared to the past few years—each of which has seen plenty of pension–related activity throughout the year—2015 has been fairly quiet. Here are some of the more notable developments:

  • Overall, funded status has probably not moved a great deal for most plans. Through the end of October, for example, the representative plans measured by Russell’s monthly LDI update were pretty much back at where they started the year.
  • It is too soon to gauge the impact of recent news of further increases to PBGC premiums. Kenneth L. Bedingfield, CFO of Northrop Grumman commented (in response to an analyst’s question) that “we don’t believe the impact of the premiums is material to us going forward.”¹ We do not expect that every CFO will reach the same conclusion.
  • Federal Express is becoming the fifth of the twenty members of the club to adopt mark–to–market pension cost accounting.
  • Because investment strategy is largely tied to funded status, which has not moved much for most plans, we do not foresee wholesale asset allocations changes across the group.
  • Contributions have in many cases fallen off a little from the level of recent years, as more corporations are taking advantage of the current flexibility in funding rules. Justin Owens went into more depth on investment and funding strategies earlier this year.

And, apart from some company–specific acquisition activity, that’s about it for pension news from the club so far this year.

Our guess is that the peace and quiet won’t last too long.


¹Northrop Grumman Earnings Call October 28, 2015. Transcript accessed at www.SeekingAlpha.com.
USI-23361-12-18
Site preferences