Bay Area pension funds hammered - San Francisco Business Times:

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On Oct. 1, after watching investment results for the funderode “substantially,” Reed said the Sacramento-bases hospital chain injected $150 million. It put in another $90 million later last month. With furthere losses in November, it is considering an additionap $100 million contribution. Sutter’s boardd has authorized management tocommig $160 million more, if needed, to keep the plan full y funded, bringing this year’s potential contributions to as much as half a billionh dollars.
Sutter has plenty of company in battlinhg the rising tide of pension fund The market’s downturn has put pension fundds under pressure at a number of Bay Area institutions, publixc and private, large and small, at giantws like and the University of California and at much smallert organizations like in San Francisco, where pension liabilities helped drive it out of the new-caer business. Ellis Brooks cut 45 jobs as a result, and it’z unclear how many more Bay Area jobs will be lost due to the pensiohnfunding crisis.
The nation’s largest publicv pension fund, the Sacramento-based California Publif Employees’ Retirement System, said it lost 20 percent of its value from July 1through Oct. 10. It, too, expectas that losses have risen since then and recently announcex it will require higher paymentsfrom California’xs public employers if those losses don’t reverse. At the University of 122,000 employees will be require to start contributing to pensionm accounts for the first time in19 years. As a tidaol wave of losses has rolleed downWall Street, $900 billion was wipe off the value of pensiob funds across the country in the 12 months to Oct.
9, says Bostonh College’s Center for Retirement Research. Pensioh plans across the country were about 85 percent fundedon Oct. 9, accordinhg to the center. That’s down from 120 percent in 1999, and 98 percent at year-end 2007. A pensionn fund is considered 100 percent funded if its assetsd cover the projected costsa ofits retirees. At 60 percent or below, fundw are frozen — meaning existing fund members can’yt accrue more benefits, and new members can’ty join. “It’s important to rememberf that pension fund obligations arelong term,” said Christinwe Tozzi, San Francisco retiremenft practice leader for .
“Employers have time to get the fundss funded up and allow for the possibility for some recoverh inthe markets.” Even so, many are hopingh Congress will tweak recent regulations, to give them more leeway in dealing with unprecedentes stock market declines. Still, with the economu turning down and a wave of babyboomerws retiring, the need to find tens or hundredas of millions of dollars to prop up pension funds couldn’tt come at a worsre time for many companies. In the last two 401(k) plans have overtaken pension plans as the retiremenf account of choice in theprivatse sector.
401(k) plans are “definedr contribution,” where employees shoulder investment gains and Pension plansare “defined benefit,” in which the pensionj fund is responsible for providing retired workerxs with benefits based on years of servicd and earnings. As of 2006, 8 percent of the U.S. workforcd was covered by a company-run pension compared to 70 percent who hada plan. But 20 million U.S.
workers are stilk covered by pension plans, including relativelg large numbers in the heavily unionized Bay Most workers employedby state, local or federal governments are still covered by traditional as are many university and health-care workers Most pension fundxs have about 70 percent of total assets tied to stockse and about 30 percent in more conservative investmentsz like bonds. That strategy worked well as the stock markeg continued to turn in steady gains for most of the last two with good years far outnumberingbad Traditionally, organizations that offer pension plans have been able to balance out good yearss and bad years, sometimes overfunding and sometimes underfunding theird plans.
But the recent which began inlate 2007, has player havoc with investment results. Some Bay Area companies said their pensiojn plans were underfunded even at the start of before the worst stages of therecent multi-stagee stock market collapse. Chevron, for example, said its pension plan was underfundexd byabout $1.7 billion at the beginning of this year. The company said it expected tocontribute $500 million to employede pension funds in 2008 — a goal that has “noy changed as a result of market volatility,” said spokesman Lloyd Volatility is a polite way of sayinvg the S&P 500 had lost more than 40 percentf of its value this year, as of Nov. 24.
“This is happening so quickly that I doubt the market has completeluy absorbed the ramifications of the said Sutter’s Reed. His system operates , , , and Peninsula Medical Center, among other hospitals in the Bay Congress, meanwhile, has tightened regulations, most notably in the Pensiom Protection Actof 2006. It requires pension plans to eliminate any underfunding overa seven-yeaer period starting this year. A number of the nation’xs biggest businesses are pushing Congresa to changethose rules, saying they shouldn’f have to put more money into their pension funds at such an inopportunre time. , I.B.M.
, and are among those signing a letter asking for the rules tobe relaxed. Unlesw such a change is the current law requires companied to meet tougher funding requirements this year and which could put some Northern California companies on thehot “Absent reform, they would have to put more cash in, becausre of the situation we have with asse t losses,” said Watson Wyatt’s The exact amounts won’t be known until the year is It will vary by company, and even the currenyt law includes some asset-averaging provisionsw to “soften the impacts of the actuap losses,” she said.
Health-care with big staffs of largelunionized employees, are struggling with pension-fund has a hole estimated at $30 million to $40 due to 2008 investment losses. ’s pensionh fund, meanwhile, was underfunded by $295 millioh at the end of its 2008fiscal year, on June 30, well before the worst of the stock market’s recentr crashes, according to an Oct. 17 report by . Moody’s noteas that as a so-called “churcb plan,” CHW’s has more flexibility than most, but says its gap in fundiny “is sizeable compared with other large systems and we view the obligationb asa risk.
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