(9 of 13)
Since the PBGC no longer publishes its Top 50 list, anyone looking for even remotely comparable information must sift through the voluminous filings of individual companies with the SEC or the Labor Department, where pension-plan finances are recorded, or turn to the reports of independent firms such as Standard & Poor's. The findings aren't reassuring. According to S&P, Sara Lee Corp. of Chicago, a global maker of food products, ended 2004 with a pension deficit of $1.5 billion. The company's pension plans held enough assets to cover 69.8% of promised retirement pay. Ford Motor Co.'s deficit came in at $12.3 billion. It could write retirement checks for 83% of money owed. ExxonMobil Corp. was down $11.5 billion, with enough money to issue retirement checks covering 61% of promised benefits. Exxon had extracted $1.6 billion from its pension plans in 1986 because they were deemed overfunded. The company explained then that "our shareholders would be better served" that way.
In reality, the deficits in many cases are worse than the published data suggest, which becomes evident when bankrupt corporations dump their pension plans on the PBGC. Time after time, the agency has discovered, the gap between retirement holdings and pensions owed was much wider than the companies reported to stockholders or employees. Thus LTV Corp., the giant Cleveland steelmaker, reported that its plan for hourly workers was about 80% funded, but when it was turned over to the PBGC, there were assets to cover only 52% of benefits--a shortfall of $1.6 billion to be assumed by the agency.
How can this be? Thanks to the way Congress writes the rules, pension accounting has a lot in common with Enron accounting, but with one exception: it's perfectly legal. By adjusting the arcane formulas used to calculate pension assets and obligations, corporate accountants can turn a drastically underfunded system into a financially healthy one, even inflate a company's profits and push up its stock price. Ethan Kra, chief actuary of Mercer Human Resources Consulting, once put it this way: "If you used the same accounting for the operations side [of a corporation] that is used on pension funds, you would be put in jail."
The old PBGC lists of deadbeat pension funds served another purpose. They were an early-warning sign of companies in trouble--a sign often ignored or denied by the companies themselves. "Somehow, if companies are making progress toward an objective that's consistent with [the PBGC's], then I think it's counterproductive to be exposed on this public listing," complained Gary Millenbruch, executive vice president of Bethlehem Steel, a perennial favorite on the Top 50.
Time proved Millenbruch wrong. The early warnings about Bethlehem's pension liabilities turned out to be right on target. Bethlehem Steel eventually filed for bankruptcy, and the PBGC took over its pension plans--which were short $3.7 billion. The company, once America's second largest steelmaker, no longer exists. In the Top 50 pension deadbeats of 1990, the PBGC reported that the funds of Pan Am Corp., operator of what was once the premier global airline, had only one-third of the assets needed to pay its promised pensions. Pan Am does not exist today.