Nearly two out of three corporate pension plans surveyed by Watson Wyatt were underfunded in 2002, and the consulting firm predicts that more will become underfunded this year. The survey showed that 37% of the 419 employers had fully funded plans, down from 84% in 1998.
Even more companies would have been underfunded in 2002, according to Watson Wyatt, had it not been for last years change in the law permitting companies to temporarily use a higher interest rate around the 30-year Treasury bond to calculate the present value of their liabilities. Watson Wyatt warned that the change expires at the end of this year. "Waiting until late this year to find a permanent replacement rate could have a dramatic and damaging impact on pension plans and plan participants, said Kevin Wagner, a retirement practice director at Watson Wyatt.