Pension funds might have morphed into profit centers from cost centers at many of the nations largest companies.
Early results of a study by two Federal Reserve Board economists indicate that savvy stock market investments by big corporate pension funds helped fuel the S&P 500 during the last half of the 1990s. Their data show that investment gains above what pension funds had expected contributed to five percentage points of the 29% pretax profit growth of the S&P 500 between 1995 and 1998.
The surplus pension earnings helped lift pretax profits for the S&P 500 by $22 billion in 1998 to $499 billion, according to Julia Coronado, one of the economists conducting the study.
Meanwhile, a new study by Towers Perrin shows that companies in the DJIA reported an aggregate of $1.4 billion in pension income in 1999, a far cry from the $1 billion in pension expense they had reported a year earlier and the $2.6 billion in pension expense they had reported in 1997.
Of the 25 companies in the Dow that sponsor defined benefit pension plans, 11 recorded pension income last year. Their total pension income exceeded the pension expense of the 14 other companies in the index that reported pension expense. At the end of 1999, the DJIA companies had combined pension assets of $459.7 billion, up 11.5% from a year earlier.