Large U.S. companies expect to contribute $26.5 billion to their global pension funds in 2009, a 26% jump from the contributions they made in 2008, according to an analysis of SEC filings of S&P 100 companies by Pensions & Investments. The companies contributed about $21 billion in 2008 and $15.3 billion in 2007.
Among the biggest expected contributions:
• Exxon Mobil Corp., Irving, Texas, $4.6 billion;
• J.P. Morgan Chase & Co., New York, $1.3 billion;
• PepsiCo Inc., Purchase, N.Y., $1.1 billion;
• Raytheon Co., Waltham, Mass., $1.1 billion;
• ConocoPhillips, Houston, $1.1 billion.
The rise in expected contributions is due to the significant losses the plans had in 2008 and new funding requirements from 2006's Pension Protection Act.
I cant imagine that in this environment, (companies) would be doing these large contributions unless they had to, said Susan McDermott, senior vice president at institutional investor consultant Stratford Advisory Group, Chicago.
And how much the companies actually end up contributing in this year is still very much in the air, noted Alan Glickstein, a senior retirement consultant at Watson Wyatt Worldwide in Dallas.
Regulatory or legislative relief in this area is quite possible, Mr. Glickstein said. I dont think this issue is done yet. While these numbers are more real, theyre not final until the money is put in.
Watson Wyatt estimated in January that "all large single-employer DB plans" in the U.S. would be required to contribute more than $108 billion in 2009, up from $38 billion in 2008. The $108 billion is about $16 billion less than what would have been required if then-President George W. Bush had not signed into law a measure temporarily easing some of the pension act's new funding regulations on Dec. 23.
Watson Wyatt and others are pushing lawmakers to ease funding regulations even more as companies deal with PPA-driven stringent funding requirements while staring straight into the unique and sudden downturn in the economy, Mr. Glickstein said.
Companies are having to balance how much money is even available to contribute and broader business issues, such as job cuts , he said. Theyre actively discussing what to do with scarce resources.
During a fourth-quarter conference call with investors, executives of Honeywell International Inc., Morris Township, N.J., defended a decision to contribute $200 million of company stock to its U.S. pension plan. David J. Anderson, CFO and senior vice president, said that after the company looked at alternatives, we thought that was the best option.
He added, according to a transcript of the call, that the company has deliberately staged the share contributions to the pension plan as a set of installments that we'll evaluate over the course of the year. We'll look to see how the pension plan actually performs, what is the return on assets, we'll look at our funded balance on a real-time or updated basis, and we we'll just continue to judge that as we go through the year.
In total, the diversified manufacturer said it plans to contribute $800 million to its U.S. plans and $140 million to its international plans in 2009, according to its 10-K filing with the Securities and Exchange Commission. If PPA funding requirements do not change, the company expects to contribute $360 million, $700 million, $1 billion and $800 million in 2010, 2011, 2012 and 2013, respectively, according to the filing.