Re: Pensions & Investments' report on plan-sponsor pension funding at http://researchcenter. pionline.com/rankings/plan-spon-sors/overview-fundedstatus.
P&I has the following headings in the report: name; assets; liabilities; funded status; funding ratio; valuation date.
P&I adds all the plan sponsor's assets and liabilities together, even though they represent totally different plans with their own assets and actuarial liabilities.
For example, General Motors has both a management and represented plan, for which there is no transferability. So the “funded status” makes no sense.
In addition, the P&I listing shows Alcatel-Lucent, ranked 30, with $32 billion in assets having an overfunded status of more than $2 billion. Alcatel-Lucent's most recent 20-F filing with the Securities and Exchange Commission shows three U.S. pension plans, (including) two with deficits: management, $924 million; and supplemental, $358 million. A third plan, occupational, has a $3.8 billion surplus. So the sum of three is positive. But since there's no transferability between any of the plans, all stakeholders — retirees, shareholders, the Pension Benefit Guaranty Corp. — are at risk of additional payments, up to $1.4 billion.
The P&I report obscures this reality. At the very minimum, there needs to be a big, big disclaimer so that the P&I reader is told to discount the usefulness of the surplus information.
This P&I report gets “three Pinocchio's,” and should be withdrawn.
Vero Beach, Fla.
EDITOR'S NOTE: The purpose of the special report is to analyze the overall health of corporate defined benefit plans, and the overall funded status for all of a company's U.S. defined benefit plans is a good indication.
Mr. Zydney is a retired Lucent executive and a member of the support staff of the Lucent Retirees Organization Inc., Chatham, N.J.
This article originally appeared in the October 15, 2012 print issue as, "P&I corporate funded status data misleading".