Beyond SEC: Ask for interest rates used to calculate pension obligations

Reporters nationwide have been exposing scandals and underfunded state government pension plans. Jill Aitoro of the Washington Business Journal brought the focus back to the corporate side with her article about Bethesda-based Lockheed Martin Corp. adding to its underfunded pension plan: Lockheed Martin pumping cash into pension plan as liabilities grow.

Jill’s story notes the difference between companies’ and analysts’ calculations is based on the interest rates used in the calculations. Higher interest rates reduce pension obligations, Jill writes.

Companies often don’t include the rates they’ve used in SEC filings, Jill says. She suggests reporters ask companies for the interest rates they’ve used in their calculations.

Jill Aitoro

This is a screenshot from Lockheed Martin's 'Who We Are' video.

The story includes a chart showing the percent of market cap the pension liabilities represent for some government contractors.

“If the ratio of liability compared to market cap is a high percentage that means there are some challenges the company is facing,” she says. “It’s common now to be underfunded. Look at the percentage to determine how badly the company is underfunded.”

Her story and blog post on the story, Pension liabilities: Market driven or new reality?, also highlight clues about the possibility of a pension plan being terminated or frozen.

“If a company is putting a lot of money in, it could be terminating” because the plan has to be fully funded before termination, Jill says.