Press Releases

Number of Employers With Large Pension Risk Levels Declined
Between 2003 and 2005

WASHINGTON, January 22, 2007 – The number of large employers facing relatively high degrees of financial risk due to pension liabilities has declined sharply, according to a Watson Wyatt analysis of FORTUNE 1000 companies that sponsored defined benefit pension plans in 2005. Pension health will likely continue to improve due to the rise in interest rates and strong stock market returns in 2006, coupled with new investment strategies and increased employer funding.

Watson Wyatt’s analysis found that pension plan liabilities posed relatively high amounts of financial risk for only 9 percent of companies, down from 17 percent in 2003 – a decline of about half over three years. Meanwhile, more pension sponsors experienced relatively low pension-related risk. Pension liabilities posed scant risk to the core business for 60 percent of plan sponsors, an increase from about 56 percent in 2004 and 51 percent in 2003.

Watson Wyatt’s Pension Risk Index, on which the findings are based, quantifies the amount of financial risk a particular company’s pension fund imposes on its core business. The analysis measures the potential dollar value decline in a pension plan’s funded status (reflecting both plan assets and liabilities) under an adverse financial market scenario. The potential drop in funding is then compared with the sponsoring company’s market value.

“Thanks to a sound economy and considerable corporate contributions, America’s pension plans are generally on firmer financial footing than they were two years ago,” said Mark Warshawsky, director of retirement research at Watson Wyatt. “With anticipated improvements in pension plan funding due in part to new rules and reductions in pension risk, concerns about the strength of our pension system should be greatly alleviated.”

A separate Watson Wyatt analysis of pension funding found that the aggregate funding level for FORTUNE 1000 companies’ pension plans increased from 82 percent to 92 percent between 2002 and 2005.

Further information on the PRI analysis and pension funding can be found at http://www.watsonwyatt.com/us/pubs/insider.

About Watson Wyatt Worldwide

Watson Wyatt (NYSE: WW) is the trusted business partner to the world’s leading organizations on people and financial issues. The firm’s global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 6,000 associates in 30 countries and is located on the Web at www.watsonwyatt.com.

Contact

Ed Emerman, 609/452-5967, eemerman@eaglepr.com
Emily Rieger, 703/258-7634, emily.rieger@watsonwyatt.com