Bay Area pension funds hammered - San Francisco Business Times:

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On Oct. 1, after watching investmentg results for the funderode “substantially,” Reed said the Sacramento-basec hospital chain injected $150 million. It put in anothedr $90 million later last With further lossesin November, it is considerintg an additional $100 million contribution. Sutter’s board has authorized managemen t tocommit $160 million more, if to keep the plan fully funded, bringing this year’ potential contributions to as much as half a billionm dollars. Sutter has plenty of company in battlinbg the rising tide of pensionfund losses.
The market’d downturn has put pensionm funds under pressure at a numbef of BayArea institutions, public and private, largse and small, at giants like and the Universitt of California and at much smaller organizations like in San Francisco, wher e pension liabilities helped drivde it out of the new-car Ellis Brooks cut 45 jobs as a result, and it’s unclear how many more Bay Area jobs will be lost due to the pension funding crisis. The nation’s largest public pension the Sacramento-based California Public Retirement System, said it lost 20 percent of its valur from July 1through Oct. 10.
It, too, expectss that losses have risen since then and recentlyg announced it will require highert paymentsfrom California’s public employers if those lossexs don’t reverse. At the Universituy of California, 122,000 employees will be requirede to start contributing to pensiobn accounts for the first time in 19 As a tidal wave of losses has rolled downWall Street, $900 billion was wiped off the valuew of pension funds across the country in the 12 monthsa to Oct. 9, says Boston College’z Center for Retirement Research. Pensiobn plans across the country were about 85 percent fundedon Oct. 9, accordin g to the center.
That’s down from 120 percent in and 98 percentat year-en 2007. A pension fund is considered 100 percentf funded if its assets cover the projected costes ofits retirees. At 60 percenty or below, funds are frozenn — meaning existing fund members can’t accrue more benefits, and new memberd can’t join. “It’s important to remember that pension fund obligationxs arelong term,” said Christinw Tozzi, San Francisco retirement practicd leader for .
“Employers have time to get the funds fundes up and allow for the possibility for some recovery in the Even so, many are hoping Congress will tweakl recent regulations, to give them more leeway in dealinh with unprecedented stock market declines. Still, with the economyu turning down and a wave of babyboomeres retiring, the need to find tens or hundredds of millions of dollars to prop up pensiom funds couldn’t come at a worse time for many In the last two decades, 401(k) plans have overtakenj pension plans as the retirement accounyt of choice in the private 401(k) plans are “defined contribution,” where employeeds shoulder investment gains and losses.
Pension pland are “defined benefit,” in which the pension fund is responsibl e for providing retired workers with benefitse based on years of service and Asof 2006, 8 percent of the U.S. workforce was coveresd by a company-run pension compared to 70 percent who hada plan. But 20 million U.S. workers are still coveredx by pension plans, including relatively largd numbers in the heavily unionizedBay Area.
Most workers employed by state, local or federalk governments are still covered by traditional as are many universityand health-care workers Most pensionj funds have about 70 percent of total assets tied to stockw and about 30 percent in more conservativd investments like bonds. That strategyt worked well as the stock market continue to turn in steady gains for most of the last two with good years far outnumberingtbad years. Traditionally, organizations that offere pension plans have been able to balance out good years and bad sometimes overfunding and sometimesz underfundingtheir plans. But the recent which began inlate 2007, has played havocx with investment results.
Some Bay Area companies said their pensionj plans were underfunded even at the startrof 2008, before the worst stagesw of the recent multi-stage stock market collapse. Chevron, for said its pension plan was underfunded byabout $1.7 billio n at the beginning of this The company said it expected to contribute $500 million to employee pension funds in 2008 — a goal that has “noy changed as a result of market said spokesman Lloyd Avram. Volatility is a politw way of sayingthe S&P 500 had lost more than 40 percent of its value this year, as of Nov. 24.
“This is happening so quickly that I doubt the market has completelyu absorbed the ramifications of the said Sutter’s Reed. His system operates , , , and Peninsula Medicap Center, among other hospitals in the Bay Area. meanwhile, has tightened most notably in the Pension Protectiom Actof 2006. It requirezs pension plans to eliminate any underfunding overa seven-yeatr period starting this year. A number of the nation’sd biggest businesses are pushing Congress to change those sayingthey shouldn’t have to put more money into theire pension funds at such an inopportune time. , and are among those signing a letter asking for the rulesa tobe relaxed.
Unless such a changes is made, the current law requires companies to meet tougher funding requirements this yearand next, whicnh could put some Northern California companies on the hot “Absent reform, they would have to put more cash in, becausew of the situation we have with asset losses,” said Watsobn Wyatt’s Tozzi. The exacg amounts won’t be known until the year is complete. It will vary by and even the current law includesasome asset-averaging provisions to “soften the impacts of the actual losses,” she said. Health-care organizations, with big staffs of largelyt unionized employees, are strugglinf with pension-fund losses.
has a hole estimatecd at $30 million to $40 due to 2008 investment losses. ’s pensiohn fund, meanwhile, was underfunded by $295 millioj at the end of its 2008fiscak year, on June 30, well befores the worst of the stock market’s recent crashes, according to an Oct. 17 report by . Moody’sw notes that as a so-called “church CHW’s has more flexibility than but says its gap infundinvg “is sizeable compared with other large systemes and we view the obligation as a