US. Fees Rise for Underfunded Pensions

The largest pension plans held by S&P 500 companies face a $348 billion funding gap. As a result, they’re paying higher annual fees to the U.S. Pension Benefit Guaranty Corp., the government agency that backstops plans. “There’s increased awareness that an underfunded plan imposes risk on employees, it imposes risk on shareholders, and it’s getting more expensive,” says Olivia Mitchell, a professor at the University of Pennsylvania’s Wharton School and executive director of the Pension Research Council.

The fees, called variable-rate premiums, are set by Congress and meant to encourage companies to set aside more money in their pension funds. They’ve more than tripled in four years for companies including General Electric Co. and Boeing Co., according to data obtained by Bloomberg News through a Freedom of Information Act request.

GE’s fees surged more than sixfold, to about $238 million, in 2017 from 2012, according to the PBGC data (that doesn’t include the agency’s flat-rate participation fees). Boeing’s bill was $151.7 million, about four times what it paid in 2014. GE and Boeing had the largest pension shortfalls among S&P 500 companies. GE, whose pension fund is short by about $31 billion, said in November it would borrow $6 billion to fund its plan. After Boeing’s fund fell short by about $20 billion at the end of 2016, the company said in July that it would add $3.5 billion of its shares to a scheduled $500 million pension contribution.

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