Volume 2, No. 8

 

Pot Of Gold Or Can Of Worms? Distortions Caused By Overfunded Pensions:  "An abundance of riches" might be the best way to describe the overfunded pension plans of some American corporations. While no investor would suggest that an underfunded plan is preferable to one that is overfunded, the overfunded plans can produce quirky, unexpected income effects that deserve attention from analysts and investors. Pension income can be significant to a company's bottom line and can distort cross-company comparisons. Furthermore, the choice of pension plan accounting assumptions can have a significant effect on this source of income: lowering those assumptions can seriously hamper net income growth.

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