
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, November 2, 1995                   TAG: 9511020098
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: NEW YORK                                LENGTH: Medium

PENSION FUNDS STRONGER

The financial health of pension plans improved in 1994 for the first time in six years, but the change resulted from a rise in interest rates rather than increased employer generosity toward workers.

A study released Wednesday by a prominent benefits consultant said the number of fully funded pension plans rose sharply last year, reversing a decline that began in 1988. When a pension plan is fully funded, it has enough assets to cover obligations to retired and current employees.

The study by Buck Consultants Inc. comes as Congress is debating Republican legislation that would allow American corporations to tap billions of dollars in pension plan money for other uses. Businesses back the proposal, while the Clinton administration and labor advocates call it a reckless strategy akin to plundering worker retirement money.

Buck's study, which covered 489 of the biggest American companies and was described by the firm as indicative of broader trends, said 75 percent had fully funded defined-benefit plans in 1994, compared with 60 percent in 1993. The figure was 95 percent in 1988.

A defined-benefit plan pays a predetermined amount on retirement regardless of what happens between now and then. Nearly 26 million Americans are enrolled in this type of plan, Labor Department figures show. ``Corporate America's defined benefit pension plans are getting `healthier,' '' Buck said in a news release.

But the reason for the improvement lay not in more generous employers, but rather in the way that pension fund health is determined. That calculation is influenced partly by the behavior of interest rates.

A sharp rise in rates last year increased returns on investments made for pensions. The net result was that a greater percentage of these plans were fully funded.

This doesn't necessarily signify a trend, said Larry Wiltse, Buck's director of forecasting and planning services. If interest rates decline significantly, more pension plans could be underfunded this year.

``What's happening is that companies aren't putting more money in these plans. They're shifting more responsibility to workers,'' said Karen Ferguson, director of the Pension Rights Center, a retiree lobby group.

by CNB