The U.K’s surprise vote to leave the European Union took a bite out of corporate pension plans in the U.S., as investors fled stocks for the safety of bonds last month, pushing interest rates lower. Under accounting rules, the declining rates triggered an increase in pension obligations for companies with defined-benefit plans, which offer retirees a set payout, the Wall Street Journal reported today. Now, those companies are pursuing a variety of tactics as they struggle to close the resulting gap in pension funding and to avoid steep increases in premium payments to the nation’s pension insurer. The combined pension deficit for S&P 1500 companies ballooned to $568 billion at the end of June, a $164 billion increase from the end of 2015, according to Mercer, a benefits consulting firm. But the market’s turmoil could help increase the coffers of the U.S. Pension Benefit Guaranty Corp., which backstops the private-sector pensions that cover about 40 million Americans. The federal agency collects a fixed fee for each person enrolled in private-sector pension plans and a separate fee, or variable premium, for every dollar that pension plans are in deficit. So, there could be a fee windfall heading its way in coming months and years as pension deficits balloon.
