The unfunded status of pension plans is and has been a subject of much discussion. Newspaper articles describe the situation as explosive. The Dominion Bond Rating Service says that the situation is not as bad as it looks. Notwithstanding, any analysis of a company should now include a review of its pension plan - its overfunded/underfunded status, its growth assumptions, and its off balance sheet liabilities. Most of the information regarding pension plans is found in the notes. As part of Standard & Poor's coverage of Canadian corporate credits, a survey was undertaken, based primarily on publicly available financial information. The screening was applied to virtually all Canadian industrial companies. No specific downgrade, outlook change, or CreditWatch actions resulted from the survey. Nevertheless, a group of companies were identified as candidates for further monitoring. Two years later in July, 2005 S&P summarized the changes that have occurred since that report. Additionally, The Certified General Accountants Association of Canada warned of a “looming social and economic crisis” in a 2004 report on the health of the country’s defined benefit pension plans. Titled Addressing the Pensions Dilemma in Canada, the survey of 847 plans, which uses data and research provided by Mercer Human Resource Consulting, concluded that 59 per cent of defined benefit plans were in deficit with the total amount owed by employers being a staggering $160-billion.
In the report, the CGA fingered the bear market and low interest rates as being the proximate causes of the crisis but warned of “deeper systemic problems which require redressing.”
These are a few tables to begin with:
