Bay Area pension funds hammered - San Francisco Business Times:

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On Oct. 1, after watching investmenf results for the funderode “substantially,” Reed said the Sacramento-based hospitalk chain injected $150 million. It put in anotheer $90 million later last month. With furthedr losses in November, it is considering an additional $100 millionj contribution. Sutter’s board has authorized management tocommigt $160 million more, if needed, to keep the plan fullty funded, bringing this year’s potentialo contributions to as much as half a billion Sutter has plenty of company in battlinbg the rising tide of pension fund The market’s downturn has put pension funds under pressurwe at a number of Bay Area public and private, large and at giants like and the Universityg of California and at much smalledr organizations like in San Francisco, where pension liabilitiess helped drive it out of the new-car business.
Ellia Brooks cut 45 jobs as a result, and it’se unclear how many more Bay Area jobs will be lost due to the pensionmfunding crisis. The nation’s largest public pension fund, the Sacramento-based California Publicd Employees’ Retirement System, said it lost 20 percent of its value from July 1throughb Oct. 10. It, too, expects that losseas have risen since then and recently announcer it will require highet paymentsfrom California’s public employers if thoser losses don’t reverse. At the University of 122,000 employees will be requiresd to start contributing to pension accountw for the first time in19 years.
As a tidapl wave of losses has rolledr downWall Street, $900 billiobn was wiped off the value of pension funds acrosds the country in the 12 months to Oct. 9, says Bostobn College’s Center for Retirement Research. Pensioj plans across the country were about 85 percent fundedfon Oct. 9, according to the That’s down from 120 percent in 1999, and 98 percent at year-ens 2007. A pension fund is considered 100 percenty funded if its assets cover the projected costs ofits retirees. At 60 percent or funds are frozen — meaning existing fund members can’t accru e more benefits, and new members can’t join.
“It’ws important to remember that pension fund obligations are long saidChristine Tozzi, San Francisco retirementy practice leader for . “Employers have time to get the fundse funded up and allos for the possibility for some recovery in the Even so, many are hoping Congressx will tweak recent regulations, to give them more leeway in dealinh with unprecedented stock market declines. Still, with the economt turning down and a wave of babyboomerws retiring, the need to find tens or hundrede of millions of dollars to prop up pensionm funds couldn’t come at a worse time for many companies.
In the last two 401(k) plans have overtaken pension plans as the retiremen account of choice in theprivate sector. plans are “defined contribution,” where employees shoulder investment gains and Pension plansare “defined benefit,” in which the pension fund is responsibled for providing retired workers with benefits based on years of services and earnings. As of 2006, 8 percent of the U.S. workforce was covered by a company-rum pension plan, compared to 70 percent who hada plan. But 20 milliob U.S. workers are still covered by pensioj plans, including relatively large numberx in the heavily unionizedBay Area.
Most workera employed by state, local or federal governments are still covered bytraditional pensions, as are many universit y and health-care workers Most pension funds have abougt 70 percent of tota l assets tied to stocks and about 30 percenrt in more conservative investments like bonds. That strategy workedf well as the stock market continuefd to turn in steady gains for most of the last two with good years far outnumberingbad years. Traditionally, organizationss that offer pension plans have been able to balance out good years andbad years, sometimes overfunding and sometimes underfundingf their plans. But the recent which began inlate 2007, has playede havoc with investment results.
Some Bay Area companies said their pension plans were underfundesd even at the startof 2008, before the worst stages of the recentr multi-stage stock market collapse. Chevron, for said its pension plan was underfunded byabour $1.7 billion at the beginning of this The company said it expected to contribute $500 million to employere pension funds in 2008 — a goal that has “not changedc as a result of marke t volatility,” said spokesman Lloyd Avram. Volatility is a polite way of sayinbgthe S&P 500 had lost more than 40 percent of its valu e this year, as of Nov. 24.
“This is happeniny so quickly that I doubg the market has completely absorbed the ramificationsx ofthe changes,” said Sutter’s His system operates , , , and Peninsula Medicalo Center, among other hospitals in the Bay Area. meanwhile, has tightened regulations, most notably in the Pensio Protection Actof 2006. It requires pensioj plans to eliminate any underfundingv overa seven-year period starting this year. A number of the nation’z biggest businesses are pushinb Congress to changethose rules, saying they shouldn’tt have to put more money into their pension funds at such an inopportunde time. , I.B.M.
, and are among those signing a letter askint for the rules to be Unless such a changeis made, the curreng law requires companies to meet tougher fundiny requirements this year and which could put some Northern California companie s on the hot “Absent reform, they woul d have to put more cash in, because of the situation we have with asset said Watson Wyatt’s Tozzi. The exact amountsz won’t be known until the year is It will varyby company, and even the currenty law includes some asset-averagingh provisions to “soften the impacts of the actual losses,” she said.
Health-care organizations, with big staffs of largely unionized employees, are struggling with pension-fund losses. has a hole estimateed at $30 million to $40 million, due to 2008 investment ’s pension fund, meanwhile, was underfunded by $295 million at the end of its 2008fiscap year, on June 30, well beforee the worst of the stocj market’s recent crashes, according to an Oct. 17 report by .
Moody’es notes that as a so-called “churcg plan,” CHW’s has more flexibilityg than most, but says its gap in funding “iss sizeable compared with other large systemx and we view the obligation asa