U.S. corporate defined benefit plans face higher liabilities in the coming months as the impact of the COVID-19 pandemic becomes apparent, according to a report from Moody's.
The report released Thursday is one of a series of in-depth sector reports from the credit agency and says rising pension liabilities will put more pressure on cash flow in sectors hardest hit by the pandemic, particularly in the airline and auto industries.
With discount rates plummeting to what Moody's said is an all-time low of 2.26% as of July 31, the 50 companies with DB plans sampled by Moody's will see their adjusted debts rise by $120 billion.
The report also said that while the CARES Act provides some short-term relief for corporations with DB plans, the help is limited.
The Coronavirus Aid, Relief and Economic Security Act, signed by President Donald Trump on March 27, provides companies the option of a one-year holiday from making 2020 pension contributions, with interest accrued, until Jan. 1, 2021.