Word: pension
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...latest of these economic measures is a bill that will be presented to Congress this week, which would nationalize the private funds in which many Argentines keep their pensions - a move that should swing some $30 billion from private individual pension accounts into state coffers. The announcement sent Argentina's stock market plummeting, while the rush of depositors to convert their savings into dollars resulted in a 7% devaluation of the peso. The financial earthquake caused by the initiative has put the Argentine economy "in intensive care," says columnist Morales Sola...
...appropriately dubbed "Pension Palpitations" report details, the S&P 500's pensions are now collectively underfunded by at least $115 billion. The problem stretches far beyond the finance sector. Five of the companies with the highest dollar amount of pension underfunding, according to the report, are Raytheon (underfunded by $1.6 billion), Johnson & Johnson ($1.5 billion), ExxonMobil ($1.4 billion), Macy's ($980 million) and Alcoa ($950 billion). "This is affecting the broad swath of companies that make up the fabric of what we call the 'real economy,'" says Mark T. Williams, a risk-management expert and finance professor at the Boston...
...With the stock market shedding more than a third of its value this year, pension funds at big companies have been battered beyond recognition. What looked like safe stowaway spots where corporations securely tucked away assets for their employees' retirements now look like roller-coaster funds. In addition to sending shivers up the spines of employees who count on that income, the problem also threatens to haunt the bottom line at many major firms. Williams says some may be forced to consider mergers to accumulate bigger asset bases or may have to sell off strategic assets...
...past, the IBMs and GEs of the world have not had to worry about underfunded pensions," says Williams. Now, though, successful firms with undervalued obligations may have to accumulate additional cash, amid the credit crunch, just to prop up their pension accounts. That's in part because evolving accounting standards - including those established in the Pension Protection Act of 2006 - prevent companies from getting too far underwater on their obligations to retirees. Public pensions have also been hit hard. State and local governments' pension funds support some 27 million Americans, and many have lost a fifth of their value this...
...Focused on long-term growth, corporate pension funds tend to lean heavily on stocks. More than 60% of S&P 500 firms' holdings at the start of the year were in equities. Those firms that bet most aggressively on stocks have been especially hard hit. For example, about 80% of Harley-Davidson's pension assets were invested in equities at the end of last year. Johnson & Johnson's (79% equities) and Exxon's (75%) funds have also been bruised. But the pension pain may be most acute for smaller outfits, some of whose obligations amount to more than...