Pension Troubles Could Be Ahead For Many Companies

Pension fund shortfalls are putting billion-dollar holes in the balance sheets of some large U.S. companies, forcing them to make huge contributions to retirement plans at a time when cash flow and credit are already under stress, according to Chicago
Business.

Underfunded pensions also are forcing borrowing costs higher for some companies. For instance, at Peoria, IL-based
Caterpillar, shareholder equity dropped more than 25% from the previous year, after the company booked a $5.8-billion pension shortfall and its plan went from 93% funded to 61% funded.

That means Caterpillar has to pay an additional 1.5 percentage points of interest to keep its untapped credit lines intact, according to U.S. Securities and Exchange Commission (SEC) filings. Its pension assets sank 30% last year, and this year’s contribution will more than double to about $1 billion. A Caterpillar spokesman declines to comment.