BJ has plenty of classy company in ‘underfunded’ pension plans

What does it mean that the BJ pension fund is “underfunded,” a word used in the BJ letter to its retirees?

Interest rates, used in the calculations, are too low. Actuarial assumptions in the formula are out of whack as long-term projecctions unless interest rates stay lower than a snake’s belly forever.

Of the 338 Fortune 500 companies with defined-benefits plans like the BJ, all but 18 are “underfunded.”

The Standard & Poor’s 500 companies collectively were underfunded by $355 billion.

It’s the formula the government requires, which uses current interest rates, that causes this scary but misleading “imbalance.” When interest rates go up, the formula will declare the pension funds fully funded with the same assets they have now.

General Electric, Exxon Mobil, IBM and JPMorgan Chase are “underfunded,” so the BJ is in good company.

What if the BJ goes into bankruptcy?

Unless your BJ pension is somewhere between $50,000 and $60,000 a year, which excludes about everyone I know with a BJ pension, the Pension Benefit Guarantee Corporation would keep sending you 100% of your pension checks, according to BJ Controller Roger Messmore.

Messmore said about 85% of pension funds are “underfunded” under the current calculations thrown a curve by low interest rates.

BJ Alums blog received inquiries about the “underfunded” wording in the BJ letter to retirees, so I decided to go to Messmore, the BJ’s resident expert on pensions, accounting and the government-required method to determine fully funded or underfunded status.

And then I double-checked Roger’s answers with government web sites. Pat Englehart taught me that tactic.

PBGC has been around for more than 40 years.

So will our BJ pensions, hopefully. I've been cashing my checks for 18 years.