By Jilian Mincer
NEW YORK | Thu Oct 13, 2011 11:39am EDT
(Reuters) – Deteriorating conditions in the pension system are jeopardizing the lump sum payouts workers count on, and pushing some workers to retire ahead of schedule.
Stock market losses began dragging down pension assets a few years ago, but the current near-zero interest rates – intended to spur the American economy – have worsened the problem and created the largest gap in assets and liabilities since the end of World War II. “While low interest rates help people borrow money, they dramatically shoot up the pension obligations of plans,” says Rebecca Davis, an attorney at the Pension Rights Center in Washington.
via Analysis: Pension woes are complicating retirement | Reuters.
I think the bigger story is that many companies according to JP Morgan will need to make growing contributions to their defined benefit plans before they pay out to shareholder in the form of earnings and dividends. In fact the write that that 3784 companies have combined benefit underfunded obligations of $357 billion.