WASHINGTON — Executives at many of the nation's largest corporations would shift their pension funds out of stocks and into long-duration bonds within the next three years if the Bush administration's proposals to shore up the Pension Benefit Guaranty Corp. and overhaul pension funding rules become law.
Bonds tend to earn lower returns than stocks, so such a move could substantially increase the cost of the pension funds to employers. That, in turn, could prompt about two-thirds of the nation's largest corporations to freeze new benefit accruals for existing employees or shut the plans to new workers.
Those are among the results of a survey of 27 big corporate plan sponsors by the Committee on Investment of Employee Benefit Assets of the Association of Financial Professionals, Bethesda, Md.
Of the pension executives who would move assets out of stocks, more than one- third would reduce equity exposure by at least 15 percentage points; one-third by up to 10 points; and the remainder by five points.
The survey also raised questions about the bond market's ability to satisfy increased demand for long-duration securities without disruption.