In This Issue: The Pension Storm Bearing Down On The Markets: Standard & Poor's currently estimates that corporate pension plans are underfunded by about $140 billion-with other postretirement employee benefits underfunded by more than twice that amount-and state pension funds underfunded by $284 billion. These shortfalls are dwarfed by federal underfunding. Social Security has a $4.6 trillion shortfall, and federal civilian and military employee programs are underfunded by $4.5 trillion. Retirement Benefits And Balance Sheets: Investors Beware: With low-cost producers in developing markets unencumbered with similar retirement expenses, the ability of U.S. companies to pass rising retirements costs along to consumers has significantly diminished. The Unique Credit Problems Facing Multi-Employer Pension Plans: Multi-employer plans are intended to provide a mechanism that allows workers to switch jobs while continuing to accumulate benefits and keep their past-earned benefits and vesting intact, as long as their new employer belongs to the same plan. New Accounting Rules Threaten Retiree Health Care: Accounting rule changes that will likely take effect within the next year or so will require private and public sector employers to recognize the funded status of pension and other postretirement employee benefits on their financial statements. America's Other Looming Bill: Unfunded Government Pensions: The large unfunded liabilities of the U.S. government's Social Security and Medicare systems receive a great deal of public attention. This scrutiny is warranted. Digging For Pension Trends In The U.S. Metals And Mining Sector: Both qualitatively and quantitatively, a key part of Standard & Poor's credit analysis-benefits promised to workers and pensioners in these industries-invariably will continue to affect companies' competitive positioning to varying degrees. Pension Plans Pose Concerns For U.S. Higher Education Budgets: Despite a serious challenge about how to fund postretirement costs and liabilities, colleges and university employers are still in better shape than other public sector employers. Unfunded Pension Liabilities Could Pressure U.S. Transportation Credits Down The Road: To date, the implications of these growing liabilities for transportation credits have not been as immediate as for municipalities because it is often easier to raise associated user fees, rates, and tolls than to hike taxes. However, the potential for credit quality erosion exists. Rising Pension Costs Could Be Unhealthy For The U.S. Nonprofit Health Care Industry: Rising employee pension costs for defined-benefit retirement plans may be the Achilles heel for U.S. nonprofit health care organizations. Standard & Poor's believes that increased pension funding requirements are likely to restrain growth in hospitals' and health systems' liquidity levels. Global Graying: Aging Societies And Sovereign Ratings: Almost all countries will face a very significant deterioration in public finances over the next half-century as a result of demographic change. The Treatment Of Pension Obligations In The Ratings Process For European Sovereigns: Standard & Poor's draws a vital distinction between defined benefit unfunded schemes and defined-contribution funded schemes, and examines the difficult transition involved in moving from the former to the latter. For U.S. Seniors, Equity Begins At Home: Employers are cutting back on pension benefits, the U.S. savings rate is negative, and health care costs are rising as life expectancies continue to increase. Combine that with a volatile investment environment, and the result is added uncertainty. Standard & Poor's Comments On FASB's Defined Benefit Pension And Other Postretirement Plans: Standard & Poor's believes that requiring a plan sponsor to report the current economic status of its defined benefit pension or other postretirement plans directly and fully on the balance sheet, instead of relegating the information to the footnotes, adds both prominence and transparency to the obligation amounts for users of the financial information, and will improve the current financial reporting framework. | 
