Exxon Mobil responds to pension 'underfunding' editorial

To the editor:

Your Dec. 26, 2016, editorial about ExxonMobil's U.S. pension plan's funded status is extremely disappointing from a reputable news organization covering the pension industry. The editorial mistakenly conflates financial reporting and funding standards, astonishingly ignores $2.1 billion in contributions made to our U.S. plan in 2016, and incorrectly suggests our plan may be at risk to either benefit restrictions or costly Pension Benefit Guaranty Corp. variable rate premiums. You claim that ExxonMobil lacks transparency on these issues, yet our annual SEC 10-K filing and our DOL Form 5500 filing, both publicly available, contain virtually all of the information to address your unfounded concerns.

Let's start with the 56% funded ratio you quote. This is the funded ratio of our total U.S. projected benefit obligations at year-end 2015. Disclosed in our 10-K, but not included in your article is the fact that $2.8 billion of these obligations relate to our non­qualified pension plans which have no U.S. funding requirement and offer no economic incentive to pre-fund. Furthermore, as the bulk of these obligations relate to management compensation, unfunded plans create a strong alignment of interest between shareholders and management for the continued long-term success of the corporation. Excluding these unfunded liabilities, the PBO funded ratio for our qualified plan stood at 66%. But even that number is far from the full story.

Readers should also expect a news organization that has covered pension accounting issues for years to know that the PBO includes an estimate of future salary increases or obligations that do not yet exist. Excluding these projections determines the ABO, or accumulated benefit obligation, a measure that includes only those obligations that have been earned by participants to date. At year-end 2015, our 10-K shows the ABO funded ratio for our qualified plan was 79%. Finally, had you taken into account the publicly disclosed $2.1 billion in additional contributions we made to the U.S. qualified plan in 2016, our ABO funded ratio approached 95%, all other things being equal. This high level of funding for existing obligations is also fully supported by the financial strength of Exxon Mobil Corp., one of the most highly rated companies in the world.

As Pensions & Investments should well know, none of the above measures is used by the IRS or PBGC to determine whether benefit restrictions need to be enforced or variable rate premiums need to be levied. Our 2015 Form 5500 filed in September 2016 shows that we easily exceeded the IRS minimum funding requirements, and that our Adjusted Funding Target Attainment Percentage funding status, which is used to test for benefit restrictions, was 116% in 2015, comfortably clearing the 80% threshold at which benefit restrictions begin to apply. We also ensured our funding levels were sufficient to avoid a completely unnecessary and expensive variable rate levy to the PBGC. In fact, we've never had to pay this fee since it came into law. Finally, our public disclosures show that we already pursue a conservative pension fund investment strategy with a full 60% of the assets invested in long duration, investment-grade fixed-income instruments with the balance held largely in a broadly diversified, passively managed, low-cost global equity strategy.

Robert N. Schleckser

Vice President and Treasurer

Exxon Mobil Corp.