Companies Have $321B Deficit for Retiree Benefits
Companies in the Standard & Poor's 500-stock index that offer retiree health benefits have a combined deficit of $321 billion for future obligations, according to an S&P survey released on Tuesday, the Wall Street Journal reports. Among the 290 companies with future retiree health benefits obligations, four had a surplus at the start of 2006, the survey finds.
According to the survey, the companies on average have funded 22% of future retiree health benefits obligations. In contrast, the more than 340 companies that offer traditional pensions have a combined deficit of only $140 billion for future obligations, and 47 of those companies had a surplus at the start of 2006, the survey finds.
S&P and other financial experts said that increased interest rates should reduce the deficit for future pension obligations, but future retiree health benefits obligations "will continue to be well short of projected outlays," the Journal reports. In addition, retiree health benefits "don't have similar tax benefits or backing" from a federal guarantor as pensions, and health care costs "are rising much faster than other living expenses," according to the Journal.
Pensions also often are guaranteed under contracts at companies that offer them, but retiree health benefits often are not (McDonald, Wall Street Journal, 6/6).